A $1,000 bond has a coupon rate of 5% with semi-annual coupon payments

| November 24, 2016

(15 points) A $1,000 bond has a coupon rate of 5% with semi-annual coupon payments and a 10-years maturity date. Mary bought the bond 4 years ago. John would like to buy the bond from Mary at the price $995 and keep it until maturity. What is the return on investment (annual yield) to John?

Note: (P/A,2%,12) = 10.5753; (P/F,2%,12) = 0.7885; (P/A,3%,12) = 9.9540; (P/F,3 %12) = 0.7014

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