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What is the maximum price that should be paid for this bond

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Question -

a. A new financial product will give you semi-annual return of 2% if you invest $1,000 twice a year for 20 consecutive years. How much will you have after 20 years?

b. Lannister is planning to invest in a 15-year bond with a face value of $1,000 that pays a 0.5 percent coupon [paying semi-annually}. Assume that coupon payments will be semi-annual. The current market rate for similar bonds is 15 percent. What is the maximum price that should be paid for this bond? Is the bond selling at a premium and why?

Reference no: EM133068349

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