The U S Treasury Issued a 10-Year Bond on November 16, 1998

question 43

Multiple Choice

The U. S. Treasury issued a 10-year bond on November 16, 1998, paying 6.47% interest. Thus, if you bought $600,000 worth of these bonds, you would receive $38,820 per year in interest for 10 years. At investor wishes to buy the rights to receive the interest on $600,000 worth of these bonds. The amount the investor is willing to pay is the present value of the interest payments, assuming a 6% rate of return. If we assume (incorrectly, but approximately) that the interest payments are made continuously, what will the investor pay?

• A)$291,918.87
• B)$2,919.19
• C)$1,178,910.86
• D)$270,713.02
• E)$1,825,910.86

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Definitions:

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Watery Sweat

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