Question
Help needed with part a-3 . Suppose you purchase a ten-year bond with 5% 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 5% 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 3.41% 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?
a-1. The cash flow at time 1-3 is $5.00
a-2. The cash outflow at time 0 is $113.28
a-3. 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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