Seven years ago you bought a $600,000, 15-year, deep discount bond with a market interest rate...

Seven years ago you bought a $600,000, 15-year, deep discount bond with a market interest rate of 5.15%. Since then market rates have gone to 5.9% and you find that you must sell the bond.

a. What was the initial price of the bond?

b. What is the current price of the bond?

c. Calculate the current annual rate of return on this instrument and compare it to the annual rate of return you were expecting.

d. Explain whether your return would have been relatively greater or less if you held originally purchased a 25-year instrument. Support your conclusion with the appropriate work

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Rahul Sunny answered 1 year ago

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