Question: Hi may you please help me understand the work behind both these problems? A bond purchased 4 years ago at a discount of $70 has

Hi may you please help me understand the work behind both these problems?

A bond purchased 4 years ago at a discount of $70 has a maturity of 20 years and a coupon of 6%. Until recently, the yield has been 7% but is expected to go up to 8% in the near future.

1. If you sell this bond now, how much will you receive?

Answer-$823

2. If you sell this bond now, your effective return (RE) over this 4 year period is?

Answer- 4%

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