A bond matures in five years and pays a semi-annual coupon of 7% on a face...

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A bond matures in five years and pays a semi-annual coupon of 7% on a face value of $1000 (the next coupon will be paid exactly six months from now). The bond's current yield is 4%. I buy the bond today and sell it in six months, immediately after I receive the next coupon. The bond's yield at that time is 3.5%. (a) At what price did I buy the bond (to the nearest penny)? (b) At what price did I sell the bond (to the nearest penny)? (c) What was my capital gain (annualized, to the nearest basis point)? (d) What was my interest income (annualized, and to the nearest basis point)? (e) What was my total return (annualized, and to the nearest basis point)? % % % A bond matures in five years and pays a semi-annual coupon of 7% on a face value of $1000 (the next coupon will be paid exactly six months from now). The bond's current yield is 4%. I buy the bond today and sell it in six months, immediately after I receive the next coupon. The bond's yield at that time is 3.5%. (a) At what price did I buy the bond (to the nearest penny)? (b) At what price did I sell the bond (to the nearest penny)? (c) What was my capital gain (annualized, to the nearest basis point)? (d) What was my interest income (annualized, and to the nearest basis point)? (e) What was my total return (annualized, and to the nearest basis point)? % % %

Answer rating: 100% (QA)

Step 12 a The bond has a face value of 1000 and a semiannual coupon of 7 Explanati... View the full answer