Rate of return on the bonds realized by the investor

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One year ago, a bank invested a sum of SEK 1 million in newly issued bonds, denominated in the same currency, with maturity five years hence. The bonds pay a yearly interest coupon calculated at the rate of 5% , and were issued at par. Today-immediately after the first coupon payment, and four years before the maturity of the bonds-the yield to maturity on the bonds is equal to 4.5%. a. What would be the capital gain realized by the investor, if the bond were liquidated today? b. What would be the rate of return on the bonds realized by the investor over the past year?

Reference no: EM13971285

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