Assume that you purchase a 30-year $1,000 par value bond, with a 12% coupon, and a yield of 9%. Immediately after you purchase the bond, yields change to 8% and remain at that level to maturity. Assume that you hold the bond for 6 years and then sell it. Interest is paid annually. PART A: What is the price of the bond today? PART B: What is the price of the bond after 7 years? Part C: Now, calculate the realized horizon yield for this bond if you hold it for 7 years and then sell it.

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A: 1 a)price of the bond today future value  = 1000 coupon (annually) = 8%( pmt) = 80 required rate of…

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A: PMT = 8% of 1000 = 80 FV = 1000 rate = 6.5% N = 19 use PV function in Excel

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A: Price=Coupon Payment×1-1+YTM-nYTM+Face Value1+YTMn

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A: Step 1:Step 2:Step 3:

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