Sasha purchased a newly-issued Province of BC $1,000 face value bond with a coupon rate of...

Transcribed Image Text:

Sasha purchased a newly-issued Province of BC $1,000 face value bond with a coupon rate of 6% and semi-annual coupons. The bond, which had a 20-year maturity, had a price equal to its par value. Three years later, Sasha sold the bond. At the time of sale, the bond market required a YTM on the bond of 8%. Over the three-year holding period Sasha was able to reinvest the coupons at the bond's original YTM. Hint - do the question in three parts: 1. Calculate the price of the bond at date of purchase and at date of sale 2. Calculate the future value of the re-invested coupons at date of sale 3. Calculate the annualized realized rate of return (ROR) Sasha purchased a newly-issued Province of BC $1,000 face value bond with a coupon rate of 6% and semi-annual coupons. The bond, which had a 20-year maturity, had a price equal to its par value. Three years later, Sasha sold the bond. At the time of sale, the bond market required a YTM on the bond of 8%. Over the three-year holding period Sasha was able to reinvest the coupons at the bond's original YTM. Hint - do the question in three parts: 1. Calculate the price of the bond at date of purchase and at date of sale 2. Calculate the future value of the re-invested coupons at date of sale 3. Calculate the annualized realized rate of return (ROR)

Answer rating: 100% (QA)

1 Calculate the price of the bond at the date of purchase and at the date of sale The bonds coupon rate is 6 with semiannual coupons and it has a face ... View the full answer