You own a 7 year bond that has a face value of $18,000 and pays 7%...

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You own a 7 year bond that has a face value of $18,000 and pays 7% interest each year once a year at the end of the year. Five years after buying it, the interest rate decreases to 5%. You do not want to wait 2 more years to get your principle of $18,000 back because you really need the money now, so you decide to sell it on the open market. 1. How much can you sell it for? Show me your spreadsheet Present Value formula. 2. Is it a capital loss or a capital gain? How much is the capital gain or loss? You own a 7 year bond that has a face value of $18,000 and pays 7% interest each year once a year at the end of the year. Five years after buying it, the interest rate decreases to 5%. You do not want to wait 2 more years to get your principle of $18,000 back because you really need the money now, so you decide to sell it on the open market. 1. How much can you sell it for? Show me your spreadsheet Present Value formula. 2. Is it a capital loss or a capital gain? How much is the capital gain or loss?

Answer rating: 100% (QA)

To calculate the value of the bond after 5 years at a 5 interest rate we will ... View the full answer