Question
Assume you buy a bond with the following features Bond maturity = 4 Coupon Rate = 5.00% Face Value = $1,000 Annual Coupons When you
Assume you buy a bond with the following features
Bond maturity = 4
Coupon Rate = 5.00%
Face Value = $1,000
Annual Coupons
When you buy the bond the market interest rate 3.50%
Immediately after you buy the bond the interest rate changes to 3.00%
What is the "reinvestment" effect in year 3 ?
Group of answer choices
A. -$0.79
B. $0.79
C. -$0.77
D. $0.77
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Managerial Finance Essentials
Authors: Charles O. Kroncke, Alan E. Grunewald, Erwin Esser Nemmers
2nd Edition
0829901590, 978-0829901597
