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A company issued a 15-year bond with a face value $100. The bond will be redeemed at par on maturity and offers 7.5% nominal coupon

A company issued a 15-year bond with a face value $100. The bond will be redeemed at par on maturity and offers 7.5% nominal coupon rate payable every four months in arrears:


(a)  The bond was sold on market at an effective annual yield of 6.4%. Determine the sale price of the bond received by the company at issuance. 

(b)  Five years later, the bond yield has risen to 8%. Find the capital gains/losses from selling 300 units of the bond purchased at issuance on the current market. 

(c)  If the bond bought at issuance is held until maturity for redemption at par, calculate the net redemption yield after 20% income tax and 10% capital gains tax. 

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To solve these problems we need to calculate the bonds cash flows and use the yield to determine its present value Lets tackle each question step by step a To find the sale price of the bond at issuan... blur-text-image

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