Question
On August 15, 2016, an 8 year bond (maturing on August 15, 2024) with a coupon rate of 2.50%, semiannual coupons, and a face value
On August 15, 2016, an 8 year bond (maturing on August 15, 2024) with a coupon rate of 2.50%, semiannual coupons, and a face value of $100 was trading at a yield to maturity of 1.57%. (a) What was the price of the bond on August 15, 2016? On August 15, 2021, the same bond (maturing on August 15, 2024) was now trading at a yield to maturity of 0.65%. (b) What was the price of the bond on August 15, 2021? (c) If you bought the bond on August 15, 2016, and sold it after the receiving the coupons through and including on August 15, 2021, what annual rate of return (APR) would you receive on this investment? How does your realized rate of return compare to the yield to maturity when you first purchased the bond?
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Financial Management Principles And Practice
Authors: Timothy Gallagher
6th Edition
1930789157, 978-1930789159
