A corporate bond with a maturity of 17 years has been issued 2 years ago at the face value of 10,000 HUF and by nominal interest rate of 8.5 per cent p.a. Interests have been paying annually, face value in an amount will be paid back at maturity. On the secondary market the bond can be bought at the price of 10,720 HUF. There are exactly 15 years to maturity. Bonds with similar risk offer 7 per cent p.a. interest.

1. What is the market value of the bond?
2. What would be the value of the bond 5 years before the maturity if bonds of similar risk offer then a yearly 5 per cent return?
3. Imagine that 162 days after the last interest payment the gross price of the bond went up to 11,100 HUF. What could be the realistic net price of the bond on the same day?
4. What is the current yield and the yield to maturity of the bond?
5. Using simplification calculate the yield to maturity of the bond, imagined, that the investor bought the bond at the price of 10,720 HUF.
6. What would be the investors realised return within the holding period if he bought the bond 10 years ago at current price and now could sell it at market value?
7. When buying the bond in the year 12, how long do you need to hold it, to get the value of your invested money back?
8. What would be the change in the market value of the bond, if expected rate of return on the market will decrease by 0.5 per cent from the current 5 per cent p.a.?