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Please use formula to solve it Mitch bought a newly issued $1,000 par-value 13% eight-year bond with semi-annual coupons. The bond was priced to yield
Please use formula to solve it
Mitch bought a newly issued $1,000 par-value 13% eight-year bond with semi-annual coupons. The bond was priced to yield a nominal 9%, convertible semiannually, so Mitch paid a pre- mium. Mitch immediately took a constant amount D from each coupon and deposited it in a savings account with a 6% annual effective interest rate. This caused his actual yield to be less than 9%. The amount D was as small as possible so that the balance in the savings account immediately after the final deposit was at least equal to the premium. (a) (3 points) Find the premium Mitch paid for the bond. (b) (3 points) Find D. (c) (4 points) Find Mitch's annual yield for the eight-year period. Mitch bought a newly issued $1,000 par-value 13% eight-year bond with semi-annual coupons. The bond was priced to yield a nominal 9%, convertible semiannually, so Mitch paid a pre- mium. Mitch immediately took a constant amount D from each coupon and deposited it in a savings account with a 6% annual effective interest rate. This caused his actual yield to be less than 9%. The amount D was as small as possible so that the balance in the savings account immediately after the final deposit was at least equal to the premium. (a) (3 points) Find the premium Mitch paid for the bond. (b) (3 points) Find D. (c) (4 points) Find Mitch's annual yield for the eight-year periodStep by Step Solution
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