2. You are given with a 12-year coupon bond with 6% coupon rate on the face value...
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Question:
2. You are given with a 12-year coupon bond with 6% coupon rate on the face value as $1,000
and with semi-annual payments. Answer the following questions:
a) Suppose the discount rate for the bond is given as 14%, what is the present value of the bond?
b) Suppose you only want to hold the bond for three years only, what is the expected bond price
when you are about to sell it at the end of third year?
c) Suppose at the end of the third year, the bond price is actually $792, what is your annual rate of
return in the 3-year holding period?
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