You are a fixed-income (bond) portfolio manager. On January 15, 2021 you purchased five-year bonds with a face value of $5 million and a coupon rate of 4.0% per year, with coupons paid semi-annually. You purchased the bonds at par.

a. What was the yield-to-maturity on these bonds at the time of the purchase?

b. On January 15, 2022 (immediately after receiving the coupon payment), you sell the bonds for $5.1 million. What is the return that you earned from your investment in the bonds? Express this as an annual rate with semiannual compounding?

Answer rating: 100% (QA)

Solution Given Face value FV 5 million Coupon rate CR 40 per year or 20 per semiannual period Coupon... View the full answer