The Johnson Corporation issues a bond which has a coupon rate of 10.20%, a yield

Question

The Johnson Corporation issues a bond which has a coupon rate of 10.20%, a yield to maturity of 10.55%, a face value of $1,000, and a market price of $850. Therefore, the annual interest payment is
   a. $101.75.
   b. $102.
   c. $105.50.
   d. $120.0.

Assume you are to receive a 10-year annuity with annual payments of $1000. The first payment will be received at the end of Year 1, and the last payment will be received at the end of Year 10. You will invest each payment in an account that pays 9 percent compounded annually. Although the annuity payments stop at the end of year 10, you will not withdraw any money from the account until 25 years from today, and the account will continue to earn 9% for the entire 25-year period. What will be the value in your account at the end of Year 25 (rounded to the nearest dollar)?
   a. $48,359
   b. $35,967
   c. $48,000
   d. $55,340

Explanation / Answer

Step-1:

Face value = $1,000

Coupon rate = $1,000 * 10.20% = $102

= $1,000 * 10.55% = $105.50

Step-2:

At the end of the year your account value

= $35,967

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