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No ChatGPT I will thumbs down Three years ago, Jenna purchased a Sherlock Watson Industries (SWI) bond. The bond has a $1,000 maturity value, a

No ChatGPT I will thumbs down

Three years ago, Jenna purchased a Sherlock Watson Industries (SWI) bond. The bond has a $1,000 maturity value, a 9 percent coupon rate, and it will be paid off in 17 years. Every six months, interest is paid; the subsequent interest payment is due in six months.

What is the bond's current market value (price), if the yield on similar-risk assets is 11%?

b. Calculate the yield Jenna will receive if she holds the bond until it matures, including the current yield, capital gains yield, and total yield. Suppose that up until maturity, the market rate won't change.

c. Assume Jenna decides to sell the bond seven years from now, with 10 years left before it matures. What price will Jenna be able to get for the bond if the market rate is 8% when she sells it in seven years? Calculate the new investor's potential returns if they decide to hold the bond until it matures in 10 years, including the capital gains yield, current yield, and overall yield. Why is the capital gains yield negative from year to year till maturity? Suppose that from the moment Jenna sells the bond until it matures, the market rate won't change.

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