Compute the original owner holding period return

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Reference no: EM131856981

Consider a $6,000 8-yr coupon bond with a 3.5% coupon rate.

a. What price can this bond be purchased for if the market interest rate is 5%? (answer in long form)

b. If this bond is purchased for $5,000, what is the current yield?

c. If this bond is purchased for $5,000, what is its yield to maturity (YTM)?

d. Explain why the Current Yield is either greater than or less than the coupon rate.

e. Explain why the YTM is either greater than or less than the current yield.

f. After five years, the market interest rate has fallen to 2%. How much can this bond be sold for? (Answer in long form.)

g. Compute the original owner’s holding period return if the bond is originally purchased for $4,700.

Reference no: EM131856981

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