Question

need answer asap pls

Suppose you purchase a 10-year bond with 6% annual 3. (Chapter 6) coupons. You hold the bond for four years, and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 5% when you purchase and sold the Fond, a. What cr sh flows will you pay and receive from your investment in the bo per $1C face value? What i the internal rate of return of your investment? b.

Answer 1

1.
Pay at t0=6%*100/5%*(1-1/1.05^10)+100/1.05^10=107.72173493

Receive at t1=6

Receive at t2=6

Receive at t3=6

Receive at t4=6+6%*100/5%*(1-1/1.05^6)+100/1.05^6=111.07569207

2.
Using financial calculator
N=4
PMT=6
PV=-107.72173493
FV=111.07569207
CPT I/Y=6.28%

Internal rate of return is 6.28%