Question

5 year ago, the bond issuer issued a 30-year 7% semiannual bond when the market interest rate was 6%. 5 years later, the interest rate changes to 8%, so what is the rate of return for this bond for the last 5 years?

Answer 1

6%

Step-1:Calculation of current price
Current Price	=-pv(rate,nper,pmt,fv)
	= $ 1,138.38
Where,
rate	=	3%
nper	=	60
pmt	=	$                           35.00
fv	=	$                     1,000.00
Step-2:Calculation of price after 5 years
Price after 5 years	=-pv(rate,nper,pmt,fv)
	= $ 1,128.65
Where,
rate	=	3%
nper	=	50
pmt	=	$                           35.00
fv	=	$                     1,000.00
Step-3:Calculation of rate of return over 5 years
Rate of return	=rate(nper,pmt,pv,fv)*2
	= 6.00%
Where,
nper	=	10
pmt	=	$                           35.00
pv	=	$                   -1,138.38
fv	=	$                     1,128.65