Question: please use excel to solve problem PROBLEM FOUR (20 MARKS) On December 31, 200150 you decided to buy a 230 year Government of Canada bond.
PROBLEM FOUR (20 MARKS) On December 31", 200150 you decided to buy a 230 year Government of Canada bond. The bond had a face value of $100,000. The coupon rate on the bond was 5 %. Coupons were paid semi- annually. On December 31, 200150 the yield to maturity on Government of Canada bonds was 45% per yearear, compounded-semi-annually. (The term structure of interest rates was flat.) After holding the bond for 137 years you decided to sell the bond on December 31*, 20187. Prior to selling the bond you received the December 31s, 20187 coupon payment. On December 31", 20187 the yield to maturity on Government of Canada bonds declined to 23% per year, eompounded-semi- annually. (The term structure of interest rates was flat.) a) How much did you pay for the bond on December 31st, 200510? How much did you sell the bond for on December 31st, 20187? b) c) What was the effective annual rate of return that you earned on your investment during the 137 years? Assume annual inflation rate has been 2% on average during the past 137 years. Can you d) calculate your real effective annual rate of return that you earned during the 137 years of investment
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