An investor just purchased bonds for $108 million that have a par value of $100 million four years remaining to maturity and an annual coupon rate of 12%. It expects required rate of return(market interest rate)on these bonds to be 9%one year from now. At what price could the investor sell bonds one year from now.
A. -107.59 Work: N=20 I/Y=4 (8/2) PMT= 45 FV=1000 PV=? PV= -107.59
In the above problem assume the investor could sell the bonds for 106 million one year from now. What is the expected annualized return on the bonds assuming they will sold one year from now.