Question
An investor purchases a just-issued 30-year, 10.500% semiannual coupon bond at 108.235 percent of par value and sells it after 15 years. The bonds yield
An investor purchases a just-issued 30-year, 10.500% semiannual coupon bond at 108.235 percent of par value and sells it after 15 years. The bonds yield to maturity is 9.655% at time of sale, and falls to 9.100% immediately after the purchase but before the first coupon is received. All coupons are reinvested to maturity at the new yield to maturity. Does the investor realize a capital gain or loss on the sale, and by what amount expressed in % of PAR?
| A. | capital loss of 4.710 % of PAR | |
| B. | capital gain of 4.710 % of PAR | |
| C. | capital loss of 3.100 % of PAR | |
| D. | capital gain of 3.100 % of PAR |
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