Five years ago, Firewood Corp. issued a bond with a 10% coupon rate, annual coupon...
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Finance
Five years ago, Firewood Corp. issued a bond with a 10% coupon rate, annual coupon payments, $1,000 face value, and 15-years until maturity.
a)You bought this bond two years ago (right after the coupon payment) when the yield-to-maturity was 8%. How much did you pay for the bond?
b)If the yield-to-maturity is 12% now, what is the value of the bond today (next coupon payment is in a year from today)?
c)If you sold the bond now (i.e., after having owned it for two years), what would be your capital gain/loss yield? Remember, the capital gain/loss yield is the return resulting from price changes of your investment.
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