Calculate the price of the bond at date of purchase

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Roberta purchased a newly-issued Province of Ontario $1,000 face value bond with a coupon rate of 6% and semi-annual coupons. The bond, which had a 20-year maturity, had a price equal to its par value. Three years later, Roberta sold the bond. At the time of sale, the bond market required a YTM on the bond of 8%. Over her three-year holding period Roberta was able to reinvest the coupons at the bond's original YTM.

Hint - do the question in three parts:

1. Calculate the price of the bond at date of purchase and at date of sale

2. Calculate the future value of the re-invested coupons at date of sale

3. Calculate the annualized realized rate of return (ROR)

Reference no: EM132788205

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