Ms. jones wants to make 14% nominal interest compounded quarterly on a bond investment. she has an opportunity to purchase a 12%, $10 comma 000 bond that will mature in 12 years and pays quarterly interest. this means that she will receive quarterly interest payments on the face value of the bond ($10 comma 000) at 12% nominal interest. after 12 years she will receive the face value of the bond. how much should she be willing to pay for the bond today?

IF mrs Jones wants to make 14% on the bond this is her required return and what the ytm of the bond should be to make her want to buy the bond. Because the bond pays a coupon of 12% she will want to pay less than the face value of the bond, so that the overall return can be 14%. Whenever the coupon rate of the bond is less than the required return or ytm, the bond is sold at a discount. In order to find at what price should she buy the bond we will need a financial calculator and input the following

FV= 10,000

YTM= 3.5 ( We divide 14 by 4 to find the ytm because the bond has quarterly compounded payments)

PMT= 300 ( We find out the 12% of 10,000 and divide it by 4 because the bond has quarterly payments)

N= 48 (12 years into 4 because there will be a total of 48 quarters and 48 payments)

Put these values in a financial calculator and compute the PV

PV= 8,845

The present value of the bond is 8,845 if the required return is 14% which means she should be willing to pay $8,845 for the bond today.

Explanation:

answer; /// i believe the correct answer to the above question is(200 pounds); /good luck

answer; functional fixedness;