On Aug. 22, 2017 Amazon.com issued a semiannual bond with coupon rate of 3.15% and maturity date of Aug. 22, 2027. The bond pays coupon on Feb. 22 and Aug. 22 every year. The current bond YTM is 0.96%. You bought the bond on Aug. 22, 2020. In September 2020, market rates decreased by 0.25%.

1. a) You plan to sell the bond in 4 years. Find out your semi-annual holding period return (assume you compound semi-annually).
2. b) Is your semi-annual holding period return higher, lower or the same as the original semi-annual YTM? Explain. 

Answer rating: 100% (QA)

First of all lets compute the price of the bond or the value of the bond on Aug 222020 when there ar... View the full answer