Question

Question help if you bought a 20minus−year bond issued by the​ government, with a par value of​ $1,000 and an interest rate of​ 8%. at maturity you will be returned the principal of

Answer 1

Pricipal amount P = 1000 Interest rate = 8% Period n = 20 - year = 8 r = periodic rate = 0.08 x8 = 0.64 So now value at maturity V = P * (1 + r)^n V = 1000(1 + 0.64)^8 => V = 1000 * 52.33 = $52330