Question: Consider a bond (with par value = $1,000) paying a coupon rate of 7% per year semiannually when the market interest rate is only 6%

Consider a bond (with par value = $1,000) paying a coupon rate of 7% per year semiannually when the market interest rate is only 6% per half-year. The bond has 3 years until maturity.

a. Find the bond's price today and 6 months from now after the next coupon is paid.

b. What is the total (6-month) rate of return on the bond?

Hint: rate of return = (Interest amount + Price Appreciation)/Initial Price

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