Suppose you purchase a 10-year bond with 6.5 % annual coupons. You hold the bond for...

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Finance

Suppose you purchase a 10-year bond with 6.5 % annual coupons.You hold the bond for four years, and sell it immediately afterreceiving the fourth coupon. If the bond's yield to maturity was4.5 % when you purchased and sold the bond, a. What cash flows willyou pay and receive from your investment in the bond per $ 100 facevalue? b. What is the internal rate of return of yourinvestment?
. The cash flows are as follows: (Round to the nearestcent.)
Year
0
1
2
3
4
Cash flow
$nothing
$nothing
$nothing
$nothing
$nothing
b. The internal rate of return of your investment is
nothing %.
(Enter your response as a percent rounded to one decimalplace.)

Answer & Explanation Solved by verified expert

4.5 Ratings (634 Votes)

a Calculating price of bond in year 0Coupon rate 65 Face value or par value 100 Years tomaturity 10 Yield to maturity 45Coupon Coupon rate x face value 65 x 100 650To find the price of bond in year 0 we will use pv function See Answer

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Suppose you purchase a 10-year bond with 6.5 % annual coupons.You hold the bond for four years, and sell it immediately afterreceiving the fourth coupon. If the bond's yield to maturity was4.5 % when you purchased and sold the bond, a. What cash flows willyou pay and receive from your investment in the bond per $ 100 facevalue? b. What is the internal rate of return of yourinvestment?. The cash flows are as follows: (Round to the nearestcent.)Year01234Cash flow$nothing$nothing$nothing$nothing$nothingb. The internal rate of return of your investment isnothing %.(Enter your response as a percent rounded to one decimalplace.)