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What would be the profit and rate of return

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Reference no: EM132952014

Question - An investor, in primary market, has just purchased the bond of IBM which has a face value of $1,000 and coupon interest rate of 9%. Although the investor prefers to keep this bond till the maturity of 8 years, considering the changes in market interest rate he is also ready to sell it if the price is reasonable. Assume that market interest rate (r) decreases to 6% from 10% after 5 years. What would be the profit and rate of return of this investor in case he decides to sell this bond at the end of year 5?

Reference no: EM132952014

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