Eight years ago, Burt Brownlee purchased a government bond that pays 3.60 percent interest. The face value of the bond was $1,000. What is the dollar amount of annual interest that Burt received from his bond investment each year? Assuming that comparable bonds are now paying 2.40 percent, will Burt's bond increase or decrease in value? Why did the bond increase or decrease in value?

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 25P
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Eight years ago, Burt Brownlee purchased a government bond that pays 3.60 percent interest. The face value of the bond was $1,000.

  1. What is the dollar amount of annual interest that Burt received from his bond investment each year?

  2. Assuming that comparable bonds are now paying 2.40 percent, will Burt's bond increase or decrease in value?

  3. Why did the bond increase or decrease in value?

 

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