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Suppose you purchase a ten-year bond with 7% annual coupons. You hold the bond for four years and sell it immediately after receiving the fourth
Suppose you purchase a ten-year bond with 7% annual coupons. You hold the bond for four years and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 5.71% when you purchased and sold the bond, a. What cash flows will you pay and receive from your investment in the bond per $100 face value? b. What is the internal rate of return of your investment? Note: Assume annual compounding. a. What cash flows will you pay and receive from your investment in the bond per $100 face value? The cash flow at time 1-3 is $ (Round to the nearest cent. Enter a cash outflow as a negative number.) The cash outflow at time 0 is $ (Round to the nearest cent. Enter a cash outflow as a negative number.) The total cash flow at time 4 (after the fourth coupon) is $ (Round to the nearest cent. Enter a cash outflow as a negative number.) b. What is the internal rate of return of your investment? The internal rate of return of your investment is %. (Round to two decimal places.)
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