0 answer

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 ?

Group of answer choices

-$2.65

-$2.73

$2.65

$2.73


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