Question
You bought $1000 par value bond three years ago for $980. The coupon rate is 8.5% and the interest is paid semi-annually. You are going
You bought $1000 par value bond three years ago for $980. The coupon rate is 8.5% and the interest is paid semi-annually. You are going to sell the bond now and rates on this type of bond are presently at 8.125%. The reinvestment rate over the last three years was 8.25% annually. What is the price of the bond now and what is your per period rate of return? The total life of the bond is 8 years.
The answers are Price=1015.16 and return/period= 4.79%
I am looking for an explanation in terms of how to find the answer using Time Value of Money on a financial calculator. Thanks!
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