Assume you purchase a 5% coupon bond (semi-annual interest payments) when the annual yield to maturity is 6% the bond has a four years remaining to
Assume you purchase a 5% coupon bond (semi-annual interest payments) when the annual yield to maturity is 6% the bond has a four years remaining to maturity ( in four years, the bond will be redeemed at par)
1. What is the bond current price?
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3. what is the bond’s expected capital gain yield for the current year?
4. if you reinvested the semi-annual coupon payments at an 7% annual rate (3.5% every 6 month) over the 4 year period, what is your annual realized ( or horizon yield) over your four year period ?
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