Imagine that you pay $265 for a 4-year, 4% coupon bond with par value of $265.You intend to hold the bond for 1 year.That is, you are going to buy a 4-year bond and then 1 year later, you'll sell a 3-year bond. Imagine that the interest rate changes from 4% to 7% over the year that you hold the bond.Answer the following questions:

(1) What is your capital gain (as a percentage of the price paid) when the bond is sold?Round your answer to two decimal places.%

(2) What is your holding period return (as a percentage of the price paid) from holding this bond?Round your answer to two decimal places.%

Answer rating: 100% (QA)

To calculate the capital gain and holding period return when holding the bond for 1 year we need to ... View the full answer