Consider a bond paying a coupon rate of 10.25% per year semiannually when the ma
ID: 2801058 • Letter: C
Question
Consider a bond paying a coupon rate of 10.25% per year semiannually when the market interest rate is only 4.1% per half-year. The bond has four years until maturity. a. Find the bond's price today and six months from now after the next coupon is paid. (Do not round intermediate calculations. Round your answers to 2 decimal places.) current price______
price after 6 months______
b. What is the total rate of return on the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Total rate of return % per six months
Explanation / Answer
a) Current price $ 1,068.73 PV(4.1%,4*2,102.5/2,1000)*-1 Price after 6 months $ 1,061.29 PV(4.1%,7,102.5/2,1000)*-1 b) Total rate of return 4.10% (1061.29+102.5/2-1068.73)/1068.73
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