Debt security with a purpose of consolidating

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Reference no: EM13765101

Assume that in 2007 the U.S. Government issued a debt security with a purpose of consolidating all of the federal national debt. At the time of the issue, each security was priced at $15,000 and promised to pay 10% coupon rate indefinitely, just as investors in the capital markets anticipated at that time for the securities of equal risk level. Assume further, that during the recession in early spring 2009, investors in the market were willing to accept yield of barely 6.0% on these contracts, and as the U.S. economy began to recover in fall 2010, investors raised their expectation to 8.0%. Giving the above please calculate the prevailing market price of these contracts in spring 2009 and fall 2010, respectively

Reference no: EM13765101

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