Question

In: Finance

Suppose that an investor with a 3-year investment horizon is considering buying an 8-year 6% coupon...

Suppose that an investor with a 3-year investment horizon is considering buying an 8-year 6% coupon bond selling at par (semi-annual coupon payments). The investor expects that she can reinvest the coupin payments at an annual interest rate of 7% and that at the end of the investment horizon all bonds will be selling to offer a YTM of 9%. How much is the coupons & interest earned on reinvesting these coupon by the end of 3-yr? Round your answer to 2 decimal places.

Solutions

Expert Solution

Coupons & interest earned on reinvesting these coupon by the end of 3-yr = $196.50

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -


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