Suppose That You Buy a Bond with Face Value $1,500

question 60

Essay

Suppose that you buy a bond with face value $1,500 that was originally issued 18 months ago. The
maturity date is 4 years from the time it was issued, and the interest rate is 4% simple interest per
year. If you pay $1,290 for the bond and keep it until the maturity date.
a. Find the amount of interest that will be paid on the bond at maturity, and the total amount of
money you'll get from the issuer at that point.
b. Find the profit you'd make on this transaction.
c. What percent of your investment is the profit made?

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Definitions:

Asserted

Stated or expressed positively and often forcefully or aggressively.

Assert Proposition

To claim that a certain proposition, a statement that can be true or false, is true.

Hypothetical-deductive Reasoning

A cognitive process, identified by Piaget, involving the ability to formulate hypotheses and systematically deduce the most logical consequences to solve a problem.

Formal Operational Thought

A stage in cognitive development, according to Piaget, where individuals develop the ability to think abstractly, logically, and systematically, usually beginning in adolescence.