Ahmet purchases a $6,000, 6-year, 10% semiannual bond on the date of issuance for par value. After

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Question:

Ahmet purchases a $6,000, 6-year, 10% semiannual bond on the date of issuance for par value. After receiving the second coupon payment, Ahmet decides to sell the bond at a price sufficient to yield a return on the original purchase price equivalent to 12% compounded semiannually. Ayşe is considering buying the bond from Ahmet. If she buys, she will keep it until maturity.

a. What is the price at which Ahmet wants to sell the bond?

b. Find the prevailing annual interest rate for this bond in the market, after Ayşe bought it.