What is the forecasted market value

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Problem - Predicting Bond Values - The portfolio manager of Ludwig Company has excess cash that is to be invested for four years. He can purchase either (1) four-year Treasury notes that offer a 9 percent yield or (2) new 20-year Treasury bonds for $2.9 million that offer a par value of $3 million and an 11 percent coupon rate with annual payments. The manager expects that the required return on these same 20-year bonds will be 12 percent four years from now.

Required -

a. What is the forecasted market value of the 20-year bonds in four years?

b. Which investment is expected to provide a higher yield over the four-year period?

Reference no: EM132914116

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