What cash flows will you pay and receive

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Question - Suppose you purchase a 10 year 5% (semi-annual pay) coupon bond. You plan to hold the bond for 6 months and then sell it.

If the bond's yield to maturity was 4% when you purchased and sold the bond, what cash flows will you pay and receive from you investment in the bond per $1000 face value?

What is the six-month rate of return on your investment?

What would have been the rate of return if instead the yield to maturity increases to 5% just when you sell the bond in six months? Without doing computations, what would have happened in the scenario above if you had held a 5 year bond for six months instead of a 10 year bond (assuming its yield to maturity was also 4% when you purchased?

Reference no: EM132835926

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