Question

Three years ago, you purchased a 30-year, $1,000 par value bond for a quoted price of 95.0. The bond pays its 5% coupon semi-annually. a) If the present market rate on identical bonds is 4%, at what price should the bond trade today? (5 marks) b) Is the bond selling at a premium or a discount? (1 mark) c) If you sell your bond today for the price you calculated above, what is your annual holding period return and your effective annual holding period return over the 3-year period? (7 marks) d) What is the current yield of the bond? (2 marks)