You have just purchased a five year maturity bond for $ 10,000 par value that pays $ 610 in coupon interest annually ($ 305 every six months) You expect to hold the bond until maturity Calculate your expected total return if you can reinvest all coupon payments at 5 percent (2 5 percent semiannuall...

Financial calculator solution Future value of coupon payments PY 2 N 4 IY 5 PMT 305 FV 126652 Sale P ...

You have just purchased a five- year maturity bond for $ 10,000 par value that pays $

Question:

You have just purchased a five- year bond for $ 10,000 that pays $ 610 in interest annually ($ 305 every six months). You expect to hold the bond until Calculate your expected total return if you can reinvest all payments at 5 percent (2.5 percent semiannually). Suppose, instead, that you plan to sell the bond after two years when you expect that a similar- risk three-year bond will be priced to yield 5.2 percent to Calculate the expected sale price of the bond and your expected total return using the same reinvestment rates. Explain why the two calculated total returns differ. Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...