3. Suppose you buy a 7 percent coupon bond today for $1,025. The bond has a...

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3. Suppose you buy a 7 percent coupon bond today for $1,025. The bond has a face value of $1,000, has 15 years until maturity, and pays interest semi-annually. When you initially purchase the bond, what rate of return (YTM) do you expect to earn on your investment? 0 ily = ? 15x2=30 n = 30 Pmt=160 1000 x 0.07 = 2 35 &r = 1000 PV=-1025 Pmt=35 /y = 13.334 x2 = 6.73268 Five years after purchasing the bond you decide to sell it. At that time the YTM on your bond has increased by 1 percent. What price should the bond sell for? oily= n = (15-5)x2 fr = 1000 (15-5) x2 pmt= 35 PV ily = 6738x 1.00 = 999.62 6.738681.00 2 What is the realized yield on your investment? 3. Suppose you buy a 7 percent coupon bond today for $1,025. The bond has a face value of $1,000, has 15 years until maturity, and pays interest semi-annually. When you initially purchase the bond, what rate of return (YTM) do you expect to earn on your investment? 0 ily = ? 15x2=30 n = 30 Pmt=160 1000 x 0.07 = 2 35 &r = 1000 PV=-1025 Pmt=35 /y = 13.334 x2 = 6.73268 Five years after purchasing the bond you decide to sell it. At that time the YTM on your bond has increased by 1 percent. What price should the bond sell for? oily= n = (15-5)x2 fr = 1000 (15-5) x2 pmt= 35 PV ily = 6738x 1.00 = 999.62 6.738681.00 2 What is the realized yield on your investment?