Answer to Question #199879 in Accounting for muhammad maaz

Question

you recently invested $5 million of your savings in a security issued by a large company. The security agreement pays you 7.25% semi-annually and 4.76% on quarterly basis and has a maturity 55 years from the day you purchased it.

Answer 1

Solution:

The total cash flow expected from this investment if compounded semi-annually for the first 3 years and on a quarterly basis for 3 years separated into the return on investment:

CF = $5,000,000\times ((0.0725\times6)+( 0.0476\times12)) = 5,031,000$

Cashflow expected = $5,031,000