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Unformatted text preview: ( 2 (of 7) 1. (20 points) Nassim invests in 10 year Treasury bonds with a total face value of $100, 000. (a) If they are zero-coupon bonds, and if the interest rate is r = 6% compounded annually, what is the cost of the bond at time a? (Round to the nearest cent.) (b) Suppose that there are annual coupons worth $6, 000 at the end of each year and the interest rate is the same as before. What is the total present value of the coupons at time a (not counting the face value of the bond itself)? (c) Continuing with part (b), what is the present value of the bond at time a? WORK: (OJ (\ -\-.. -yV\ V('f\ ) c= 0 ~OG,fO. i001<., ~ 5~ <b 3'1 , L\ 1-t-b'12~ SS) ~~~ ,Y~ - ~COl} (l-O,oGT
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- Fall '10