You are considering the purchase of a bond with a semiannual coupon of $40, ten years to maturity, a face value of $1,000, and a current market price of $1,000.
a. At what price will the bond sell in the market in 6 months, immediately after the first coupon payment, if the stated annual yield on the bond (in six mos.) is 4%?
b. If you were to buy the bond now and sell it after six mos., what holding period rate of return would be earned over the six month period?© BrainMass Inc. brainmass.com March 4, 2021, 7:58 pm ad1c9bdddf
The solution calculates the bond prices after 6 months and the holding period rate of return if the bond is purchased now and sold at the end of 6 months.