The capital gain/loss per 100 of par value resulting from the sale of the bond at the
Question:
The capital gain/loss per 100 of par value resulting from the sale of the bond at the end of the five-year holding period is closest to a:
A. Loss of 8.45.
B. Loss of 3.31.
C. Gain of 2.75.
An investor purchases a nine-year, 7% annual coupon payment bond at a price equal to par value. After the bond is purchased and before the first coupon is received, interest rates increase to 8%. The investor sells the bond after five years. Assume that interest rates remain unchanged at 8% over the five-year holding period.
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The correct answer is B Loss of 331 To calculate the capital gain or loss we need to compare the pur...View the full answer
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