00:03
All right, so it says you purchased an annual interest coupon bond one year ago, a six years remaining to maturity at the time of purchase.
00:09
Coupon rate is 10%, face value is $1 ,000.
00:13
At the time you purchased the bond, the yield to maturity was 8%.
00:16
If you sold the bond after receiving the first coupon payment and the bond's yield to maturity had changed to 7%, your annual total rate of return on holding the bond for that year would be.
00:27
We have several choices here, 7%.
00:30
7 .82%, 8%, and 11 .95%.
00:35
So let's take a look at, you know, what the solution would be for this.
00:40
So the present value of the bond before you sold it, we have the face value of 1 ,000, okay? and then we have six years, payment, 110%, times of the 1 ,000, rate was 8%.
00:55
So we can use excel to calculate using the pb function...