# 1. (1)Assume you buy a bond with the following features Bond maturity = 4 Coupon Rate...

###### Question:

1.

(1)Assume you buy a bond with the following features

Bond maturity = 4
Coupon Rate = 7.00%
Face Value = $1,000 Annual Coupons When you buy the bond the market interest rate = 7.00% Immediately after you buy the bond the interest rate changes to 8.20% What is the "reinvestment" effect in year 4 ? Group of answer choices -$5.73

$5.73 -$5.57

$5.57 (2)Assume you buy a bond with the following features Bond maturity = 4 Coupon Rate = 7.00% Face Value =$1,000
Annual Coupons

When you buy the bond the market interest rate = 7.00%
Immediately after you buy the bond the interest rate changes to 8.20%
What is the "reinvestment" effect in year 3 ?

-$2.65 -$2.73

$2.65$2.73

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