Question
Help needed with part a #3. Suppose you purchase a ten-year bond with 4% annual coupons. You hold the bond for four years and sell
Help needed with part a #3.
Suppose you purchase a ten-year bond with 4% annual coupons. You hold the bond for four years and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 2.28% when you purchased and sold the bond,
(Note: Assume annual compounding)
a. What cash flows will you pay and receive from your investment in the bond per $100 face value?
a1. The cash flow at time 1-3 is $4.00
a2. The cash outflow at time 0 is $115.23
a3. The total cash flow at time 4 (after the fourth coupon) is ???
b. What is the internal rate of return on your investment? 3.41%
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