What is the maximum amount she should pay for the bond

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Jane Smith, MD, has had a great year in her pediatrics practice and has cash that she wants to invest. Her financial adviser suggests she buys a seven year, $1,500 par value bond with an annual coupon rate of 10% and 3 years remaining to maturity. Dr. Smith decides to explore her options. She discovers that new, similarly risky bonds have an average annual rate of return of 12%. Bank certificates of deposit are returning 5% annually on average while a mutual fund investing in high risk growth stocks has an annual average rate of return of 20%. If Dr. Smith follows her financial adviser's advice, what is the maximum amount she should pay for the bond. Explain and calculate in excel.

Reference no: EM132375427

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