Martin purchases a $20,000 8% fifteen-year par-value bond having annual coupons for price to provide 7% annual yield rate if bond is held to maturity. Five years later, just after the receipt of the fifth coupon, he sells it to Mary. With this new purchase, Mary gets a yield to maturity of 8%.
(a) Determine the coupon amount of this fifteen-year bond?
(b) Compute the modified rate of this bond?
(c) Calculate the price of the bond using the premium-discount formula.
(d) Determine the book value (B5) of the bond at the end of the fifth year?
(e) Determine the price at which Mary purchases the bond from Martin?
(f) Find out Martine's actual yield rate?