Consider a bond with annual coupon payments. You purchased the bond when it was originally
iss...
Consider a bond with annual coupon payments. You purchased the bond when it was originally
issued. Immediately thereafter, the YTM had changed and remained at this new level
indefinitely. Today, at the end of year 4 (immediately after the 4th coupon payment), your bond
investment has the following characteristics:
Total Interest (Coupons) =
Interest-on-Interest (I2) =
Capital Gains =
Realized Return (annual) = $5,476.75
$1,047.89
$759.06
13.773973%
Hint: Do not assume any face value or any time to maturity at issue
You must show ALL work – including any calculator keystrokes to receive credit. Please, find
the following:
a. The annual coupon (in dollars and cents)
b. The new YTM (as a percentage with 3 digits after the decimal point)
c. The purchase price of the bond (in dollars and cents)
d. The face value of the bond (in dollars and cents)
e. The coupon rate (as a percentage with 3 digits after the decimal point)
f. The market value of the bond at the end of year 4 (in dollars and cents)
g. The time to maturity at issue (round to the nearest year)
h. The realized return at the end of year 10 (as a percentage with 3 digits after the decimal
point)
i. The realized yield at the end of year 10 (as a percentage with 3 digits after the decimal
point)
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