A $5,000 bond had a coupon rate of 5.25% with interest paid semi-annually. Alici

Question

A $5,000 bond had a coupon rate of 5.25% with interest paid semi-annually. Alicia purchased this bond when there were 8 years left to maturity and when the market interest rate was 5.50% compounded semi-annually. She held the bond for 3 years, then sold it when the market interest rate was 5.00% compounded semi-annually. a. What was the purchase price of the bond? $0.00 Round to the nearest cent b. What was the selling price of the bond? $0.00 Round to the nearest cent c. What was Alicia's gain or loss on this investment? amount was $ $0.00 .

please provide accurate answer through financial calculator showing all steps

Explanation / Answer

Purchase price:

Input the following values in Financial calculator

PMT = 0.0525*5000/2 = 131.25

N = 8*2 = 16

I/Y = 0.055/2 = 0.0275

FV = 5000

CPT-> PV = $4919.97

Buying price = $4919.97

b.

Selling price

Input the following values in Financial calculator

PMT = 0.0525*5000/2 = 131.25

N = (8-3)*2 = 10

I/Y = 0.05/2 = 0.025

FV = 5000

CPT-> PV = $5054.70

Selling price = $5054.70

C

Gain/ Loss = Selling price - Buying price

= 5054.70 - 4919.97 = $134.73

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