Question

Julie bought a bond with a 5.2% coupon at its face value of $1000 and held it for 15 years, until it reached maturity. The length of the period for the bond was 6 months. Provide Julie with some assistance in determining how she made out on her investment. (5 points: Part I – 1 point; Part II – 1 point; Part III – 1 point; Part IV – 1 point; Part V – 1 point)

Part I: How many of the bond's periods were there in 1 year?









Part II: What was the periodic interest rate of the bond?









Part III: How much did the bond earn per period?









Part IV: For how many periods did Julie hold the bond?









Part V: What were Julie's total earnings on the bond?


​

Answer 1

Part I: How many of the bond's periods were there in 1 year?

2 periods.

Part II: What was the periodic interest rate of the bond?

2.6%

Part III: How much did the bond earn per period?

$26

Part IV: For how many periods did Julie hold the bond?

30 periods

Part V: What were Julie's total earnings on the bond?

$1560