You have just purchased a 4-year coupon bond paying a coupon rate of 12% per year...
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You have just purchased a 4-year coupon bond paying a coupon rate of 12% per year annually with a face value of $100. Suppose the yield curve is flat at 3%. a. [2pts] Find the bond's price today and 2 years from now after the coupon is paid. Assume the yield to maturity on the bond is 2% after 2 years. b. [2pts] What is your rate of return if you sell the bond right after receiving the second coupon assuming that you do not reinvest your coupon payments? You have just purchased a 4-year coupon bond paying a coupon rate of 12% per year annually with a face value of $100. Suppose the yield curve is flat at 3%. a. [2pts] Find the bond's price today and 2 years from now after the coupon is paid. Assume the yield to maturity on the bond is 2% after 2 years. b. [2pts] What is your rate of return if you sell the bond right after receiving the second coupon assuming that you do not reinvest your coupon payments?
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SOLUTION a The bonds price today is 9467 and the bonds price 2 years from now is 9108 The bonds pric... View the full answer
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