Castle Company’s pension fund projected that a significant number of its employees would take advantage of a retirement program the company plans to offer in 10 years. Anticipating the need to fund these pensions, the firm bought zero coupon Government of Canada bonds maturing in 10 years. When these instruments were originally issued, they were 6% semiannual 30-year bonds. The stripped bonds are currently priced to yield 3.75%. Their total maturity value is $18,000,000. What is their total cost (price) to Castle today?

Castle Company’s pension fund projected that a significant number of its employees would take advantage of a retirement program the company plans to offer in 10 years. Anticipating the need to fund these pensions, the firm bought zero coupon Government of Canada bonds maturing in 10 years. When these instruments were originally issued, they were 6% semiannual 30-year bonds. The stripped bonds are currently priced to yield 3.75%. Their total maturity value is $18,000,000. What is their total cost (price) to Castle today?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 16P

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