You are considering the purchase of an outstanding Nickel Corp bond that was issued at par on Oct. 2, 2007 with a 10-year maturity. It is now Oct 2, 2013. The bond has an 8% coupon rate and has semi-annual coupons. The price is now $1,068.23.
a) If you bought this bond today and held it to maturity, what would be the return on this bond? State your return as an annual rate, which is calculated as two times the six month rate.
b) Next year the YTM on this bond decreases by 1 percentage point on an annual basis and you decide to sell it. What percentage will your bond sell for?
c) Re: b) what was your rate of return for this investment?
1 answer