Question: Tinker Spy Corp. has a high-yield junk bond with the following features: Prinicipal 1,000 Coupon 0% for years 1 through 5 and 10% years 6

Tinker Spy Corp. has a high-yield junk bond with the following features:

Prinicipal 1,000

Coupon 0% for years 1 through 5 and 10% years 6 through 10

maturity 10 years

The current interest rate on comparable debt is 10%. If you expect the interest rate will be 8% five years from now, what is your potential gain or loss if your expectation is correct and the interest rates are 8 percent after 5 years?

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