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30 Year, 6% Coupon Bond Use the following information to answer the next two questions: Suppose you buy a 30-year, 6% coupon bond when its

30 Year, 6% Coupon Bond

Use the following information to answer the next two questions: Suppose you buy a 30-year, 6% coupon bond when its YTM is 6.5% and you plan to hold it for 3 years. You forecast that the YTM will be 7% when it is sold and the reinvestment rate on coupon payment will be 4%. Assume that bond pays annual coupon payment.

How much do you pay to buy the bond and how much can you sell it for after 3 years?

$921.80 and $889.39

$934.71 and $880.13

$988.10 and $884.65

$1,020.12 and $899.55

What is the total value of your coupon payments at the end of 3 years with reinvestment rate of 5%? And what is your realized return over 3 years of investment?

$210,85 and 4.25%

$180.00 and 2.89%

$187.30 and 4.53%

$187.30 and 5.31%

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