An investor buys a $1,000, 20 year 7 percent (interest paid semiannually) bond at par. After five years have passed, interest rates are 10 percent. How much did the investor lose on the purchase of the bond? (Hint: price today and price when rates are 10%. If it sells at part today, what do you know about the required rate today?. This is a semiannual bond) Please show excel calculation.

Answer rating: 100% (QA)

To calculate the loss incurred by the investor on the purchase of the bond we need to compare the present value of the remaining cash flows at the new ... View the full answer