You intend to purchase a 6% semiannual bond today that has a face value of $1000 and has 12 years left until maturity. T

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answerhappygod
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You intend to purchase a 6% semiannual bond today that has a face value of $1000 and has 12 years left until maturity. T

Post by answerhappygod »

You intend to purchase a 6% semiannual bond today that has a
face value of $1000 and has 12 years left until maturity. The yield
on the bond is 7%.
a. What price would you pay for it?
$919.71
b. Suppose you purchase the bond and hold it
for 2 years. Between today and two years from today, the yield on
the bond drops by 50 basis points. You sell the bond at the end of
the two years. What price will you get for the bond?
$963.65
c. For your two-year bond investment
what is the realized rate of return?
How do I calculate these values in Excel? I got the correct
answers but am having particular trouble with part c. Thank you in
advance.
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