You paid $5,000 to buy a Canadian Tire bond with a face value (maturity value) of $ 5,000 that matures in 30 years and has a coupon rate of 4% payable semi -annually. (a) Calculate t he semi -annual coupon payment. ANSWER: You sell the bond in 7 years, when the interest rate on similar bonds is j 2 = 5.4% . (b) How many coupons (payments) are left? ANSWER: (c) How much is your expected gain or loss on the sale of the bond? B/E P/Y C/Y N I/Y PV PMT FV

You paid $5,000 to buy a Canadian Tire bond with a face value (maturity value) of $ 5,000 that matures in 30 years and has a coupon rate of 4% payable semi -annually. (a) Calculate t he semi -annual coupon payment. ANSWER: You sell the bond in 7 years, when the interest rate on similar bonds is j 2 = 5.4% . (b) How many coupons (payments) are left? ANSWER: (c) How much is your expected gain or loss on the sale of the bond? B/E P/Y C/Y N I/Y PV PMT FV

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 9P

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Question

You paid $5,000 to buy a Canadian Tire bond with a face value (maturity value) of $

5,000

that matures in 30 years and has a

coupon rate of

4% payable semi

-annually.

(a)

Calculate t

he semi

-annual coupon payment.

ANSWER:

You sell the bond in 7

years, when the interest rate on similar bonds is

= 5.4%

(b)

How many coupons (payments) are left?

ANSWER:

(c)

How much is your expected gain or loss on the sale of the bond?

B/E

P/Y

C/Y

I/Y

PMT

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