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# Interest on bonds/investment question - Help!!!! watch

1. This is a question i've been set to do (it is a direct shot of the question, so there definitely aren't any typing errors - that is the question exactly). If anyone can solve it I will rep them over and over again, and will come and bow at their feet

2. Suppose that the price paid by investor A is x.

The investor gets 56 quarterly payments (after tax) of 0.75*0.25*600 = 112.50. Discounted to time 0, the total value of these payments is

112.50/1.1^(n/4) = 3436.85

After 14 years, the investor gets a final payment (after tax) of 10000 - 0.3(10000 - x) = 7000 + 0.3x. Discounted to time 0, the value of that payment is

(7000 + 0.3x)/1.1^14 = 1843.32 + 0.0789994x

Solving

x = 3436.85 + 1843.32 + 0.0789994x

gives x = 5733.08.
3. I love you lol. Thanks sooo much.

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Updated: November 17, 2005
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