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Please answer all aspects of the question. Suppose you purchase a ten-year bond with 4% annual coupons. You hold the bond for four years and
Please answer all aspects of the question.
Suppose you purchase a ten-year bond with 4% 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 3.06% when you purchased and sold the bond, a. What cash flows will you pay and receive from your investment in the bond per $100 face value? b. What is the internal rate of return of your investment? Note: Assume annual compounding. a. What cash flows will you pay and receive from your investment in the bond per $100 face value? The cash flow at time 1-3 is $ (Round to the nearest cent. Enter a cash outflow as a negative number.) (Round to the nearest cent. Enter a cash outflow as a negative number.) The total cash flow at time 4 (after the fourth coupon) is $ . (Round to the nearest cent. Enter a cash outflow as a negative number.) b. What is the internal rate of return of your investment? The internal rate of return of your investment is The cash outflow at time 0 is $ %. (Round to two decimal places.)Step by Step Solution
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