Problem $13-10$

You are given the following information concerning a noncallable, sinking fund debenture:

Principal: $$1,000$

Coupon rate of interest: $6$ percent

Term to maturity: $17$ years

Sinking fund: $5$ percent of outstanding bonds retired annually; the balance at maturity

a$.$ If you buy the bond today at its face amount and interest rates rise to $12$ percent after four years have passed, what is your capital gain or loss? Assume that the bond pays interest annually. Use Appendix B and Appendix D to answer the question. Use a minus sign to enter the loss amount, if any, as a negative value. Round your answer to the nearest dollar.

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b$.$ If you hold the bond $17$ years, what do you receive at maturity?

c$.$ What is the bond's current yield as of right now? Round your answer to the nearest whole number.

$\%$

d$.$ Given your price in a$,$ what is the yield at maturity? Round your answer to the nearest whole number.

$\%$

e$.$ What proportion of the total debt issue is retired by the sinking fund? Round your answer to the nearest whole number.

$\%$

f$.$ If the final payment to retire this bond is $$1,200,000,$ how much must the firm invest annually to accumulate this sum if the firm is able to earn $6$ percent on the invested funds? Use Appendix $C$ to answer the question. Round your answer to the nearest dollar.

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