Question 8

Three years ago, you invested in a zero coupon bond with a face value of $1,000 that had a YTM of 11.0% and 5 years left until maturity. Today, that bond has a YTM of 6.5%. Due to a financial emergency, you are forced to sell the bond. What is your capital gain/loss, which is defined as the dollar gain/loss relative to the price of the bond when you bought it? Recall that the compounding interval is 6 months and the YTM, like all interest rates, is reported on an annualized basis. (Enter just the number in dollars without the $ sign or a comma and round off decimals to the closest integer, i.e., rounding $30.49 down to $30 and rounding $30.50 up to $31.)