The U.S. government will pay SB Amos $2,500,000 each six months, equal to 2.5% of the $100 million face amount of the treasury bonds (5% annual coupon rate, paid in two installments each year), and will repay the $100 million at the end of five years. Assume that at the time SB Amos purchases the bonds, the market prices these bonds to yield SB Amos 6% annually (3% each six months). The bonds are
classified as held to maturity. SB Amos will pay an amount equal to _____ for the bonds.
a. $95,734,898
b. 100,000,000
c. 105,567,432
d. 110,987,012
e. 116,802,503
A
Note that $95,734,898 is the only amount issued at a discount.
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