Question
I ONLY NEED STEPS FOR PROBLEM (C). I'VE WRITTEN ANSWERS FOR (A) AND (B) DOWN BELOW. 3. Assume the government issues a semi-annual bond that
I ONLY NEED STEPS FOR PROBLEM (C). I'VE WRITTEN ANSWERS FOR (A) AND (B) DOWN BELOW.
3. Assume the government issues a semi-annual bond that matures in 5 years with a face value of $1,000 and a coupon yield of 10 percent.
(a) What would be the price if the yield to maturity (semi-annual compounding) on similar government bonds were 8%?
P = 1081.11
(b) What price would you be willing to pay for such a bond if the yield to maturity (semi-annual compounding) on similar 5-year government bonds were 12%?
P = 926.40
(c) Suppose you held the bond in (a) for 6 months, at which time you received a coupon payment and then sold the bond for a price of 104 (per $100 of face value). What would be the (annualized) holding period return?
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