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QUESTION
( 15 points) A $1,000 bond has a coupon rate of 5% with semi-annual coupon payments and a 10-years maturity date. Mary bought the bond 4 years ago.
(15 points) A $1,000 bond has a coupon rate of 5% with semi-annual coupon payments and a 10-years maturity date. Mary bought the bond 4 years ago. John would like to buy the bond from Mary at the price $995 and keep it until maturity. What is the return on investment (annual yield) to John?
Note: (P/A,2%,12) = 10.5753; (P/F,2%,12) = 0.7885; (P/A,3%,12) = 9.9540; (P/F,3 %12) = 0.7014
CashFlowsPurchase PriceCouponsPrincipalSum of Cash FlowsPVNPVIRR (6 Month)Annual Yield 3.16%6.43% Semiannual Period01-995.0025.00-995.00-995.000.00 26.0025.20 2 3 4 5 6 7 8 9 10 11...