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Exactly 3 years ago, you purchased at par a 11-year, 10 percent semi-annual coupon bond, with a face value of $1000. Today, the market rate
Exactly 3 years ago, you purchased at par a 11-year, 10 percent semi-annual coupon bond, with a face value of $1000. Today, the market rate of interest is 6%.
i) What was the interest rate (discount rate) at the time you purchased the bond?
ii) Suppose you wish to sell the bond today, how much can you sell if for?
iii) What is your rate of return on the bond if all coupons were reinvested in an account,
which pays 2% interest per year until the bond is sold 2 years after owning it?
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