Suppose that in January 2040, you buy a 30-year zero-coupon U.S. Treasury bond with a maturity value of $100,000 and a yield of 5% annually.

(a) How much do you pay for the bond? (Round your answer to the nearest cent.)

(b) Suppose that, 15 years later, interest rates have risen again, to 12%. If you sell your bond to an investor looking for a return of 12%, how much money will you receive? (Round your answer to the nearest cent.)

(c) Using your answers to parts (a) and (b), what will be the annual yield (assuming annual compounding) on your 15-year investment? (Round your answer)

Question

Suppose that in January 2040, you buy a 30-year zero-coupon U.S. Treasury bond with a maturity value of $100,000 and a yield of 5% annually.

(a) How much do you pay for the bond? (Round your answer to the nearest cent.)

(b) Suppose that, 15 years later, interest rates have risen again, to 12%. If you sell your bond to an investor looking for a return of 12%, how much money will you receive? (Round your answer to the nearest cent.)

(c) Using your answers to parts (a) and (b), what will be the annual yield (assuming annual compounding) on your 15-year investment? (Round your answer)