Assume that you purchase a 30-year $1,000 par value bond, with a 10% coupon, and a yield of 8%. Immediately after you purchase the bond, yields change to 8% and remain at that level to maturity. Assume that you hold the bond for 6 years and then sell it. Interest is paid annually. What is the price of the bond today? What is the price of the bond after 7 years? Now, calculate the realized horizon yield for this bond if you hold it for 7 years and then sell it.

Assume that you purchase a 30-year $1,000 par value bond, with a 10% coupon, and a yield of 8%. Immediately after you purchase the bond, yields change to 8% and remain at that level to maturity. Assume that you hold the bond for 6 years and then sell it. Interest is paid annually. What is the price of the bond today? What is the price of the bond after 7 years? Now, calculate the realized horizon yield for this bond if you hold it for 7 years and then sell it.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 8MC: Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for...

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Please show how to work this out.
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