Consider a bond with annual coupon payments. You purchased the bond when it was originally issued. Immediately thereafter, the YTM had changed and remained at this new level indefinitely. Today, at the end of year 4 (immediately after the 4th coupon payment), your bond investment has the following characteristics:
Total Interest (Coupons) =
Interest-on-Interest (I2) =
Capital Gains =
Realized Return (annual) = $5,476.75
$1,047.89
$759.06
13.773973%
Hint: Do not assume any face value or any time to maturity at issue
You must show ALL work – including any calculator keystrokes to receive credit. Please, find
the following:
(a) The annual coupon (in dollars and cents)
(b) The new YTM (as a percentage with 3 digits after the decimal point)
(c) The purchase price of the bond (in dollars and cents)
(d) The face value of the bond (in dollars and cents)
