Solution-Calculate the net gain, All coupons are then

Calculate the net gain

Reference no: EM131167420

Melissa borrows an amount at an annual effective interest rate of 9% and will repay all interest and principal in a lump sum at the end of 15 years. She uses the amount borrowed to buy a 1000 par value 15-year bond with a coupon rate of 10% convertible semiannual. The bond redeems at par value and it is purchased to yield 12% convertible semiannually. All coupons are then reinvested at an annual nominal rate of 5% convertible semiannually. Coupons are paid-out at the end of each 6-month period. Calculate the net gain or (loss) to Mellissa at the end of 15 years.

(a) 82 (b) 54 (c) 12 (d) (18) (e) (35)

Reference no: EM131167420

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Calculate the net gain

Reference no: EM131167420

Reference no: EM131167420

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