A one-year U.S. Treasury discount bond has a face value of $52,500.00 and is selling for $50,000.00 today. A corporatio...

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A one-year U.S. Treasury discount bond has a face value of $52,500.00 and is selling for $50,000.00 today. A corporation bond

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Answer 1

Answer #1

F = P *(1+i)^t

Here F = 52500, P = 50000, T = 1

i = 52500 / 50000 - 1

= 1.05 - 1

= 0.05 = 5%

Interest rate on corporation bond = 20% + 5% = 25%

Price of corporation bond = 45000 / (1+0.25) = 45000 / 1.25 = 36000

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Answer 2

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A one-year U.S. Treasury discount bond has a face value of $52,500.00 and is selling for $50,000.00 today. A corporatio...

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