Sam has the opportunity to purchase a us treasury bond that


Sam has the opportunity to purchase a US Treasury bond that matures in eight years and has a face value of $10,000. This means that Sam will receive 10,000 cash when the bond's maturity date is reached. In addition, the bond stipulates a fixed nominal interested rate of 8 percent of the face value. The interest payments are made to the bondholder every three months so each payment amounts to 2 percent of the face value. He would like to earn 10 percent interest compounded quarterly on his investment because interest rates in the economy have risen since the bond was issued. How much should Sam be willing to pay now for the bond? Draw a cash flow diagram.

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Microeconomics: Sam has the opportunity to purchase a us treasury bond that
Reference No:- TGS0941280

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