Financial investment

Gerry is an entry-level engineer at Boeing Aerospace in California. He took a financial risk and bought a bond from a different corporation that had defaulted on its interest payments. He paid $4240 for an 8% $10,000 bond with interest payable quarterly. The bond paid no interest for the first 3 years after Gerry bought it.

If interest was paid for the next 7 years, and then Gerry was able to resell the bond for $11,000, what rate of return did he make on the investment? Assume the bond is scheduled to mature 18 years after he bought it. Perform hand and computer analysis

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A $10,000 loan amortized over 5 years at an interest rate of 10% per year would require payments of $2638 to completely repay the loan when interest is charged on the unrecovered balance. If interest is charged on the principal instead of the unrecovered balance, what will be the balance after 5 years if the same $2638 payments are made each year?

 

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