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QUES4. You buy a government bond that pays interest twice a year. The interest payment is $300 every six months. The bond matures in six
QUES4. You buy a government bond that pays interest twice a year. The interest payment is $300 every six months. The bond matures in six years. The face value of the bond is $10,000. The annual market interest rate is 6 percent.
- What is the present value of the bond? Show your work. 4 marks
- After six months go by, you receive the first interest payment of $300. The annual market interest rate has declined to 5 percent and you decide to sell the bond. What is the bond's present value when you sell it? Show your work. 6 marks
What is your total return from owning the bond for six months (expressed at an annual rate, in percentage points, with two decimals)? Show your work
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