A portfolio manager buys $20 million par value of a 15-year bond that promises to pay 10% interest ratio per year. The reinvestment rate per period is 8%.

1. Is $20 million the price of the bond? Explain.

No, the price of a bond is not $20,000,000

2. What is the ROR of the bond?

The rate of return of the bond is 8%.

3. What will be the market price of the bond at the 8% yield?

4. Show that the economic profit of investing in the bond if the market price is $0.
5. What will be the excess return in part d)?
6. Show that at the yield 8%, the investment in the bond will grow at the annual rate of 8%.
7. Calculate the capital gain rate if the bond is bought at the market price.

8%=$2,000,000$23,423,791.48=0.099%

Please help in answering question d., e., and f.