Consider a bond paying a coupon rate of 10% per year semiannually when the market interest rate is only 4% per half-year. The bond has three years until maturity.a. Find the bond’s price today and six months from now after the next coupon is paid.b. What is the total (6-month) rate of return on the bond?
Consider a bond paying a coupon rate of 10% per year semiannually when the market interest rate is only 4% per half-year. The bond has three years until maturity.a. Find the bond’s price today and six months from now after the next coupon is paid.b. What is the total (6-month) rate of return on the bond?
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 11P
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Consider a bond paying a coupon rate of 10% per year semiannually when the market interest rate is only 4% per half-year. The bond has three years until maturity.
a. Find the
b. What is the total (6-month)
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In part (b), why was the coupon payment added to the difference between the current and inital price?
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