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You observe that The James Company Inc. issued a $10 trillion 7 year bond 5 and a half years ago. The bond pays its 7
You observe that The James Company Inc. issued a $10 trillion 7 year bond 5 and a half years ago. The bond pays its 7 percent coupon semi-annually.
- If the current market interest rates are 5.5 percent, what will a bond from the James Company sell for in the market today? (4 marks)
- What is the current yield on this bond? (2 marks)
Problem 4 (4 marks)
You bought the James bond from problem 3 when the bond was first issued for a quoted price of 99.25.
- If you sell the bond today, what is the effective annual holding period return that you earned on your investment? Show your work and your time line.
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