(a) Suppose you purchase a 20-year, zero-coupon bond with a yield to maturity of 10%. For...

(a) Suppose you purchase a 20-year, zero-coupon bond with a yield to maturity of 10%. For a face value of $800, the bond will initially trade for

(b) If the bond’s yield to maturity change to be 12%, what will its price be five years later?

(c) If you purchased the bond at $118.91 and sold it 5 years later, what would the rate of return of your investment be?

Expert Solution

a)

b)

c)

Hence, rate of return is 4.21%

jeff jeffy answered 1 year ago

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