An investor has purchased a 20-year bond with a nominal value of 1000 TL, an annual coupon interest rate of 10% and a commitment to pay coupon interest annually. The investor paid 850 TL for this bond. The annual interest rates in the market today are 12%.

• The investor sold the bond 2 years after receiving it when the interest rate on the market is 8%. Calculate the rate of return of the investor from this investment. Calculate what the rate of return would be if the investor sold this bond in the 3rd year. 
• Consider that the market rate will be stable for upcoming years as 12%. Calculate the value of the bond in the 5th, 6th and 10th years. 
• 11 years have passed since the receipt of the bond, and the market interest rates increased to 18%. Calculate the new value of this bond. 

Answer rating: 100% (QA)

Step 1 Introduction Value of bond Pres... View the full answer