How actual selling price differ from the forecasted price

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SDS has just purchased bonds for $38M that have a par value of $40M five years remaining to maturity, and coupon rate of 12%. It expects the required rate of return on these bonds to be 10% two years from now.

Problem a. At what price could SDS sells these bonds two years from now?

Problem b. What is the expected annualized yield on the bonds over the next two years, assuming they are to be sild in two years?

Problem c. if the anticipated required rate of return of 10% in two years is overestimated, how would the actual selling price differ from the forecasted price? How would the actual annualized yield over the next two years differ from the forecasted yield?

Reference no: EM132757226

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