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Question
Emily is contemplating the purchase of a 20-year bond that pays $50 interest every six months. The face value of the bond is $1,000. She plans to hold the bond for 10 years and sell it. She requires a 12 percent annual return but believes that the market will give only an 8 percent return when she sells the bond 10 years from now. Assuming she is a rational investor, how much should she be willing to pay for the bond today?
a. $1,126.85
b. $885.30
c. $737.50
d. $927.68
e. $856.91
Answer
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Related questions
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Q:
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