Number of Periods =20*2 =40
Semi annual coupon =8.4%*1000/2 =42
Face Value =1000
Semi annual YTM =9.4%/2 =4.7%
Price of Bond =PV of Coupons+PV of Par Value
=42*((1-(1+4.7%)^-40)/4.7%+1000/(1+4.7%)^20 =910.5606
After 6 months number of Periods =39
New Semiannual rate =10.4%/2 =5.2%
Price of bond =PV of Coupons+PV of Par Value
=42*((1-(1+5.2%)^-39)/5.2%+1000/(1+5.2%)^39 =834.3230
Realised return =(834.3230+42-910.5606)/910.5606 =-4.10%
You buy a 20-year bond with a coupon rate of 8.4% that has a yield to...
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