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Suzie has borrowed an amount at an annual effective interest rate of 6% and will repay all interest and principal in a lump sum at
Suzie has borrowed an amount at an annual effective interest rate of 6% and will repay all interest and principal in a lump sum at the end of 15 years. She uses the amount borrowed to purchase a 2000 par value 15-year bond with 10% semiannual coupons bought to yield 8% convertible semiannually. (Go find the price, so you know what was borrowed). She reinvests all coupon payments at a nominal rate of 6% convertible semiannually. Calculate the net gain to her at the end of the 15 years after she repays the loan.
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