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.
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? (3 marks)
If you sell your bond today for the price you calculated above, what is your EFFECTIVE
ANNUAL HOLDING PERIOD RETURN over the 3-year period? (6 marks)
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Entrepreneurial Finance
Authors: Philip J. Adelman, Alan M. Marks
4th Edition
0132434792, 9780132434799
