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Question: on 1 july 2020 golden ltd acquired some government bonds...

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On 1 July 2020, Golden Ltd acquired some government bonds which pay interest of $100,000 at the end of each of the next five years and the principal of $1,000,000 on 30 June 2025.

The government bonds were acquired at a price that will generate an effective interest rate of 5%. On 30 June 2021, the required market rates of return for these government bonds decreased to 4%.

5.2 Determine the initial purchase price of the government bonds on 1 July 2020. (2 marks)

 

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