Question
consider a $1,000 per value bond with an 8% semiannual coupon. There are 10 years remaining until maturity. assume that the required return on the
consider a $1,000 per value bond with an 8% semiannual coupon. There are 10 years remaining until maturity. assume that the required return on the bond is 6%.
a) assume the current market price is $1150.
Should you buy or sell this bond today?
At what price?
b) Assume investor XXX buys the bond $1150 today and holds it for 6 months. After receiving the coupon, investor XXX sells the bond for $1040. What is investor XXX's return rate in 6 months?
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Finance for Executives Managing for Value Creation
Authors: Gabriel Hawawini, Claude Viallet
4th edition
9781133169949, 538751347, 978-0538751346
