d. Even if a bond has no chance of​ default, is your investment risk free if you plan to sell it before it​ matures? Explain.

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 8MC: Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for...
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note:- give me answer( d) explan answer 

 

Suppose you purchase a​ 30-year, zero-coupon bond with a yield to maturity of 6%. You hold the bond for five years before selling it.

a. If the​ bond's yield to maturity is 6% when you sell​ it, what is the internal rate of return of your​ investment?

b. If the​ bond's yield to maturity is 7% when you sell​ it, what is the internal rate of return of your​ investment?

c. If the​ bond's yield to maturity is 5% when you sell​ it, what is the internal rate of return of your​ investment?

d. Even if a bond has no chance of​ default, is your investment risk free if you plan to sell it before it​ matures? Explain.

Note​: Assume annual compounding. 

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