What is your potential gain or loss

Reference no: EM13289347

Please show step by step calculations.

Tinker Spy Corp. has a high yield junk bond with the following features:
Principal $1,000
Coupon 0% for years 1 - 5 and 10% for years 5 - 10
Maturity 10 years

The current interest rate on comparable debt is 10%.

If you expect that the interest rate will be 8% 5 years from now, what is your potential gain or loss if your expectation is correct and interest rates are 8% after 5 years?

Reference no: EM13289347

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