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Five years ago, Aladdin bought 1 0 0 newly issued Magic Lamp bonds with fifteen years left to maturity, a charming 1 2 % coupon
Five years ago, Aladdin bought newly issued "Magic Lamp" bonds with fifteen years left to maturity, a charming coupon rate, and semiannual coupon payments. At the time of issue, the TM on these bonds was Until now, he was able to reinvest any coupons received at an interest rate of compounded semiannually. Today, the YTM of these bonds sit at and Aladdin wishes to sell his bonds and embark on a new adventure.
a What magical price did Aladdin pay for these bonds?
b What enchanting price can Aladdin sell the bonds for in the market today?
c How much interest in $s has Aladdin earned by reinvesting the received coupons?
d What is the rate of return he realized in this investment.
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