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What will be her percentage capital gain or loss

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Question - A $1,000 par value bond was issued five years ago at a 8 percent coupon rate. It currently has 10 years remaining to maturity. Interest rates on similar debt obligations are now 10 percent. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.

Required -

a. Compute the current price of the bond using an assumption of semiannual payments.

b. If Mr. Robinson initially bought the bond at par value, what is his percentage capital gain or loss?

c. Now assume Mrs. Pinson buys the bond at its current market value and holds it to maturity, what will be her percentage capital gain or loss?

d. Why is the percentage gain larger than the percentage loss when the same dollar amounts are involved in parts b and c?

Reference no: EM133028965

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