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Question: a today t0 an investor purchased a seven year bond...

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  1. A. Today (T=0), an investor purchased a seven year bond with an 8.0% coupon for $105,500. The bond has a face value of $100,000. The bond’s yield to maturity is closest to:

    1. 5.5%

    2. 6.7%

    3. 7.0%

    4. 8.0%

    5. 11.0 %

      B. Today (T=0), an investor purchased a nine year bond with an 8.0% coupon for $9,680. The bond has a face value of $10,000. In six months (T=0.5) interest rates have increased by 1.0% and the investor decides to sell the bond immediately after receiving the first coupon payment. What is the investor’s total gain (loss) on the bond? HINT: Total Gain (Loss) = Price Change in Bond + Coupon

      A. ($583) B. ($183) C. ($150) D. $190 E. $990

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