Rob buys a ond at t=0. Par is $1000, Coupon is annually paid with 10% and...

Rob buys a ond at t=0. Par is $1000, Coupon is annually paid with 10% and the maturity is 6 years. He invests the first year coupon at 8% for a year and sells the bond shortly after he receives the second year coupon. At t=2 (time of sale) the bonds yield to maturity is 9.5%. If he earned an annualized return of 14% on this two year investment what is the purchase price of the bond at t 0

Expert Solution

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

Cell reference -

jeff jeffy answered 2 years ago

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