Question

Question 2 of 4 A $6,000 bond had a coupon rate of 4.75% with interest paid semi-annually. Heather purchased this bond when there were 9 years left to maturity and when the market interest rate was 5.00% compounded semi-annually. She held the bond for 3 years, then sold it when the market interest rate was 4.50% compounded semi-annually. em a. What was the purchase price of the bond? $0.00 Round to the nearest cent. b. What was the selling price of the bond? $0.00 Round to the nearest cent. c. What was Heather's gain or loss on this investment? (click to select) amount was $ Next Question Submit Question

Answer 1

Price=Coupon rate*Par value/yield*(1-1/(1+yield/2)^(2*n))+Par value/(1+yield/2)^(2*n)

1.
=4.75%*6000/5.00%*(1-1/(1+5.00%/2)^18)+6000/(1+5.00%/2)^18
=5892.349773

2.
=4.75%*6000/4.50%*(1-1/(1+4.50%/2)^12)+6000/(1+4.50%/2)^12
=6078.110841

3.
Gain of 6078.110841+3*2*4.75%*6000/2-5892.349773=1040.761068