Question: Having this info, solve problem at bottom. Perpetual bond that pays an annual coupon of $200 per year and yields on competing instruments are 5%.
Having this info, solve problem at bottom. Perpetual bond that pays an annual coupon of $200 per year and yields on competing instruments are 5%. If competing yields are expected to change to 12%, what is current yield on same bond assuming you paid $4000?
This is the part I'm having a problem with. If you sell this bond in exactly one year, having paid $4,000 and received exactly one coupon payment, what is your total return if competing yields are 12%? (answer in %)
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