header bg

Scan QR code or get instant email to install app

Question:

One year ago, an investor purchased a 10-year, $1,000 par value, 8% semiannual coupon bond with an 8% yield to maturity. Now, one year later, interest rates remain unchanged at 8%. If the investor sells the bond today (immediately after receiving the second coupon payment, and with no transaction costs), he will have:

A no capital gain or loss.
explanation

At the time of purchase, the coupon rate = the market rate, so the bond traded at par. One year later, with interest rates unchanged, the bond would still trade at par, or $1,000. Thus, there would be no gain or loss from the sale.

Comments

Leave a Reply

Your email address will not be published.

*