Sales price at the end of your investment horizon

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Suppose you buy a 30-year, 7.5% (annual payment) coupon bond for par value ($1,000) when its yield to maturity (YTM) is 7.5% and you plan to hold it for 15 years. Your forecast is that the reinvestment rate on the coupons will be 5% and that when the bond is sold its YTM is 8%.

a) What is the forecast sales price at the end of your investment horizon?

b) What is the value of the compounded coupon payments at the end of your investment horizon?

c) What is your forecast annualized compound return on your investment?

Reference no: EM132008832

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