Question

A bank, buys bonds with a par value of $2.5 million for $24,040,000. The coupon rate is 10 percent, and the bonds anke anneal paymetita. The benta. market wakie of the bonds be in three years?

a. $24,667,230
b. $2,4,113,418
c. $25,462,962.96
a. $25,891,632

Answer 1

To find the market value of the bonds in three years, use the compound interest formula.

Step-by-step explanation:

To find the market value of the bonds in three years, we need to calculate the future value of the bond. The future value can be calculated using the compound interest formula:

Future Value = Principal + Interest

Where Principal is the initial investment and Interest is the interest earned over the specified time period.

Given that the bonds have a par value of $2.5 million and a coupon rate of 10%, the annual payment from the bonds is $250,000 (10% of $2.5 million). The market value of the bonds in three years can be calculated as follows:

Market Value = $24,040,000 + ($250,000 limes 3)

Market Value = $24,040,000 + $750,000 = $24,790,000