Vick incorporated sold bonds on January 1, 2005. The bonds were 15 year bonds with a 4% coupon. The market rate of interest was 5 percent. The terminal value of the bond is 1000 in all practice problems and on exam as well. In the exam questions I will explicitly state it. 1. What was the price of the bonds ? 2. What was the interest expense for the first two years ? 3. On January 1, 2007 (after two years) the market rate of interest was now 3 percent. What would be the price of the bonds now? 4. If Vick were to buy back the bonds at this time, what would be the gain or loss?

Vick incorporated sold bonds on January 1, 2005. The bonds were 15 year bonds with a 4% coupon. The market rate of interest was 5 percent. The terminal value of the bond is 1000 in all practice problems and on exam as well. In the exam questions I will explicitly state it. 1. What was the price of the bonds ? 2. What was the interest expense for the first two years ? 3. On January 1, 2007 (after two years) the market rate of interest was now 3 percent. What would be the price of the bonds now? 4. If Vick were to buy back the bonds at this time, what would be the gain or loss?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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