A coupon bond has a face value of 1000 and maturity 5 years, Ask an Expert

Economics

A coupon bond has a face value of $1,000 and maturity 5 years. The required rate of return for the bond is 5%.

(1) The bond is sold at a price of $1,000 now. Calculate the coupon rate of the bond.

(2) Year by year, calculate the current yield and the capital gain for the bond. Are the rate of returns constant?

(3) Now that an unexpected shock happens suddenly at the end of year 3 which drives the required rate of return to 7%. What is the average return of the bond for the whole 5 years?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91389052

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