Author Question: ABC Inc. issued at par value a 15-year, 7% semiannual coupon bond with a par value of $1,000. At the ... (Read 40 times)

poopoo · **on:** Aug 7, 2023

Question 1

A zero coupon bond with a nominal $1,000 face value has 18 years to maturity and is issued with a price of $302.50. What is the implicit interest you earn on the bond in the first year of the bond’s life, keeping all other factors constant?

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$68.68

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$60.05

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$20.78

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$17.54

Question 2

ABC Inc. issued at par value a 15-year, 7% semiannual coupon bond with a par value of $1,000. At the end of 3 years the market interest increases to 9%. One year later, the market interest is 10%. If an investor purchases the bond at the end of year 3 and sells it 1 year later, how much is the capital gain or loss?

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–$49.00

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–$50.31

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–$52.50

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–$55.60

Karla347 · **Reply #1 on:** Aug 7, 2023

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