Getting lost on an exercise hope you can help, thanks.
A 1000 par value bond purchased two years ago at 890 now trades at 925. Coupons of 100 received at the end of each of the two preceding two years, last coupon received today. Intend to hold bond another four years while expecting annual coupons of 100 and market price 960 by end of the term. The required return is 11.25%.
1 What’s been your realized rate since date of purchase?
2 Is bond currently trading at fair market value?
3 Expected rate of return over the next four year period?