Hi,
Can you please guide me on how to approach and solve this problem?
Chen buys 1500 government bonds at the face value worth of $100 per bond at a 4% discount. Bond’s interest rate is 9% (not compounded) and is paid monthly, maturity is in 6 months. How much return (in % of initial investment) will Chen get after the maturity date of the bonds?
Many thanks
Well, you'll get 2 sources of income:
So the % return is $8.5 / $96, so around 9%.
Hi there,
It's great that you're using the Q&A, however I also highly advise you to start building your research/do-it-yourself skills! A quick google search gives you the literal formula for calculating the value of a bond.
I only say this because, when you enter the consulting world, you'll have to learn to research + figure out things like this on your own :)
Hi, in addition to the solutions proposed by the other coaches in the discussion, I would like to suggest similar cases in the platform to practice with:
Hope it helps,
Antonello
Hello!
Agree with Henning. However, you won´t get to those complications in an interview for consulting or MBB.
Best,
Clara
Thanks Henning! Do I need to add anything else to the 9%. The solution key shows 56.25%