Four and a half years ago, you purchased at par, a 10-year 6% coupon bond that pays semi-annual interest. Today the market rate of interest is 4% and you are considering selling the bond. Show your work on paper, not on excel.

1. What was the market rate of interest at the time you purchased the bond?
2. Suppose you wish to sell the bond today
   1. How much should you sell the bond for?
   2. What is the current yield on the bond?
   3. What will be your effective annual holding period return on the bond?
3. Suppose your friend offers you a price of $1125 for the bond today. Would you be willing to sell the bond to her? Explain your answer.

Answer rating: 100% (QA)

1 The market rate of interest at the time you purchased the bond 6 3 The selling price of the bond w... View the full answer