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On Feb. 1, 2005, a bond with par value 10000 and annual coupons at 4% was purchased to yield an effective annual interest rate of
On Feb. 1, 2005, a bond with par value 10000 and annual coupons at 4% was purchased to yield an effective annual interest rate of 4.5 percent. On Feb 1, 2010, the bond is redeemable at 11000. The book value of the bond is adjusted each year so that it equals the redemption value on Feb 1, 2010. Calculate the amount of write-up or write-down in the book value in the year ending Feb 1, 2006.
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