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Please let me know the equations. Consider the following investment scenario: (a) Purchase a 10-year bond that pays a 6% coupon on a monthly basis
Please let me know the equations. Consider the following investment scenario: | |||||||||
(a) Purchase a 10-year bond that pays a 6% coupon on a monthly basis with a 4.8% yield to maturity. | |||||||||
Answer the questions below and assume $100 face for prices and coupons. Show all your work for full credit. | |||||||||
What is the periodic coupon, C: | |||||||||
What is the periodic yield, y: | |||||||||
What is the number of payments T: | |||||||||
What is the price, P: | |||||||||
(b) You hold the bond for 5 years. During the holding period you reinvest the coupons at 3.6%. | |||||||||
What is the future value of your coupons and reinvestment interest? | |||||||||
Coupons and interest: | |||||||||
(c) At the end of 5 years you sell the bond at a 6% YTM. What is the sales price? | |||||||||
Sales price: | |||||||||
(d) What is the total return of this investment? | |||||||||
Total return: |
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