Youpurchasea20-yearbondintheprimarymarketwitha5ytmannualcoup, Ask an Expert

Finance

You purchase a 20-year bond in the primary market with a 5% YTM, annual coupon payments and $1000 face value.

Immediately before the 5th payment you need to sell the bond and the competitive market rate has risen to 9%.

a) Draw the cash flow diagram for the bond. Indicate where the new buyer enters the problem.

b) what does the bond sell for.

c) what is the new YTM of the bond? explain.

d)what is the rate of return for the seller?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92001699

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