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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)
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?
b) Is the bond selling at a premium or a discount?
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?
d) What is the current yield of the bond?
Please explain/solve with formulas.
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