Question Three years ago, you purchased a 30-year, $1,000 par value bond for a quoted price of

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Three years ago, you purchased a 30-year, $1,000 par value bond for a quoted price of 95.0. The bond pays its 5% coupon semi-annually. a) If the present market rate on identical bonds is 4%, at what price should the bond trade today? (5 marks) b) Is the bond selling at a premium or a discount? (1 mark) c) If you sell your bond today for the price you calculated above, what is your annual holding period return and your effective annual holding period return over the 3-year period? (7 marks) d) What is the current yield of the bond? (2 marks) Three years ago, you purchased a 30-year, $1,000 par value bond for a quoted price of 95.0. The bond pays its 5% coupon semi-annually. a) If the present market rate on identical bonds is 4%, at what price should the bond trade today? (5 marks) b) Is the bond selling at a premium or a discount? (1 mark) c) If you sell your bond today for the price you calculated above, what is your annual holding period return and your effective annual holding period return over the 3-year period? (7 marks) d) What is the current yield of the bond? (2 marks)

Answer rating: 100% (QA)

Lets solve each part of the question a To calculate the price of the bond today we can use the present value formula for bonds textBond Price C21 11 r... View the full answer