21 Jul WHAT IS NEW PRICE OF YOUR BOND AND WHAT HAS BEEN THE RATE OF RETURN FROM HOLDING THE BOND OVER THE FIRST YEAR?
You purchase a 20-year bond today with a $10000 face value that makes annual coupon payments at a 5 Show more You purchase a 20-year bond today with a $10000 face value that makes annual coupon payments at a 5% coupon rate. (a) If the yield to maturity on 20 year bonds at the time of purchase was 4% how much did you pay for the 20 year bond? (b) After holding the bond for 1 year you find that the yield to maturity on 19 year bonds is 5%. What is new price of your bond and what has been the rate of return from holding the bond over the first year? (c) After holding the bond for a second year you find that the yield to maturity on 18 year bonds is 3.5%. What is new price of your bond and what has been the rate of return from holding the bond from the first year to the second? Show less
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