Bond A pays $12,000 in 28 years. Bond B pays $12,000 in 14 years. (To keep things simple, assume these are zero-coupon bonds, which means the $12,000 is the only payment the bondholder receives.) Suppose the interest rate is 5 percent. Using the rule of 70, the value of Bond A is approximately
Bond A pays $12,000 in 28 years. Bond B pays $12,000 in 14 years. (To keep things simple, assume these are zero-coupon bonds, which means the $12,000 is the only payment the bondholder receives.) Suppose the interest rate is 5 percent. Using the rule of 70, the value of Bond A is approximately
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter9: An Introduction To Basic Macroeconomic Markets
Section: Chapter Questions
Problem 12CQ
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Bond A pays $12,000 in 28 years. Bond B pays $12,000 in 14 years. (To keep things simple, assume these are zero-coupon bonds, which means the $12,000 is the only payment the bondholder receives.)
Suppose the interest rate is 5 percent.
Using the rule of 70, the value of Bond A is approximately
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