Coupon = 0.05 * 1000 = 50
Price in 1 year = Coupon * [1 1 / (1 + r)n] / r + FV / (1 + r)n
Price in 1 year = 50 * [1 - 1 / (1 + 0.09)39] / 0.09 + 1000 / (1 + 0.09)39
Price in 1 year = 50 * [1 - 0.034703] / 0.09 + 34.702965
Price in 1 year = 50 * 10.725522 + 34.702965
Price in 1 year = $570.9790
Rate of return = [(Ending value + coupon - beginning value) / beginning value] * 100
Rate of return = [(570.9790 + 50 - 642.26) / 642.26] * 100
Rate of return = -3.31%
A bond is issued with a coupon of 5% paid annually, a maturity of 40 years,...
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