You invested $100,000 in a fixed semi-annual coupon bond when these bonds were issued by Forest Investors Limited. The details of this bond, on issue, are as follows:
Bond price: 100 (the price per $100 of face value)
Coupon rate: 9.00% per annum, compounded half yearly
Term to maturity: five years
Use a financial calculator where appropriate.
(a) After two years, yields to maturity on identical securities are 8.00% per annum, compounded half yearly. What is the price of this Forest Investors bond in the market?
(b) find out your annual holding period return over the first two years.