Sale Price and Rate of Return of a Bond?

Question

SemiAnnual Coupon of $40

Ten years to Maturity

Face Value = $1,000

Current Mkt Price = $1,000

What price will the bond sell in 6 months after the first coupon payment if the stated annual yield on the bond (in 6 mos.) is 4%?

If you were to buy the bond now and sellit after 6 mos, what holding period rate of return would be earned over the 6 month period?

Answer 1

it depends on the current market interest rate. You cant work it out otherwise.

You have the yield which is fine, so after 6 months you get ure semi coupon payment of $40.

$40* 1+interest rate^10      +       1000/1+interest rate  

Gives u future value bond in 10 years.

Post the interest rate and i can work it out for you...