A 15 year bond has a par-value of 500 and pays semi-annual coupons at a 7% rate. An investor purchases the bond at a pri...
A 15 year bond has a par-value of 500 and pays semi-annual coupons at a 7% rate. An investor purchases the bond at a price such that its yield to maturity is 6% convertible semi-annually. The investor sells the bond immediately after 8th payment at a price such that its new owner's yield to maturity is 5% convertible semi-annually. What was the original investor's yield convertible semi-annually on this investment over the 4-year period?
Homework Answers
Using Excel
=RATE(4*2,7%*500/2,-PV(6%/2,15*2,-7%*500/2,-500),PV(5%/2,2*11,-7%*500/2,-500))*2
=7.76%
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