Problem:
Assume that a 15-year, $1,000 face value bond pays interest of$37.50 every 3 months. If you require a nominal annual rate of return of 12 percent, with quarterly compounding, how much should you be willing to pay for this bond? (Hint: The PVIFA and PVIF for 3 percent, 60 periods are 27.6748 and 0.1697, respectively.)
- $821.92
- $1,207.57
- $986.43
- $1,120.71
- $1,358.24
Note: Please show how you came up with the solution.