Question: A 2 5 - year maturity corporate bond has a 6 . 5 % coupon rate ( the coupons are paid semiannually ) . The

A 25-year maturity corporate bond has a 6.5% coupon rate (the coupons are paid semiannually). The bond currently sells for $935. You plan to hold the bond for 15 years. You believe that you will be able to reinvest the coupons earned over the next 15 years at a 6.25% rate of return. A bond market analyst forecasts that in 15 years yield rates on these bonds will be at 7.0%.
(1) What are the total coupon payment plus interest on interest at the end of year 15 based on the expected reinvestment rate? (5 points)
(2) What will be the resale value of the bond given the future yield at the end of investment horizon? (5 points)
(3) What is your total return if you plan on selling the bond in 15 years? (5 points)

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