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dougmal
January 16th 2006, 02:07 PM
Even with textbooks in front of me i can't figure out # 2 from the fall 2005 exam. Here's the question:


Data for Question 2 (5 points)
Terms of a serial bond:
Face amount of bond: $100,000.
Terms of redemption: 10 equal annual installments at 125% of par
commencing at end of 10th year after purchase;
except that the 4th redemption is at 100% of par.
Coupons: 6%, payable semi-annually.
Yield rate: 5%, compounded annually.
Question 2
In what range is the purchase price?
(A) Less than $121,850
(B) $121,850 but less than $121,950
(C) $121,950 but less than $122,050
(D) $122,050 but less than $122,150
(E) $122,150 or more

Basically, i don't understand the terms of redemption. Any help would be greatly appreciated! thanks!