How much would another investor be willing to pay

Assignment Help Macroeconomics

Reference no: EM13204293

Suppose that you re considering the purchase of a security that has the following timeline of payments:

Year Interest face value
1 600
2 600
3 600
4 600; 1000

a) How much would you be willing to pay for this security if he market interest rate is 6%?

b) Suppose that you have just purchased the secutiy, and suddenly the market interst rate falls to 5%. What is the secuity worth?

c)Suppose that one year has elapsed, you have recieved the first payment of 600$, and the markt interest rate is still 5%. How much would anothe investor be willing to pay for your security?

d) Suppose that the two years have elapsed since you purchased the security, and you hve recieved the first two payments of $600 each. Now suppose the market interest rate suddenly jumps to 10%. How much would another investor be willing to pay for your security?

Reference no: EM13204293

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