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An investor borrows an amount at an annual effective interest rate of 5% and will repay...

An investor borrows an amount at an annual effective interest rate of 5% and will repay all interest and principal in a lump sum at the end of 20 years. She uses the amount borrowed to purchase a 10,000 par value 20-year bond with 8% semiannual coupons bought to yield 6% convertible semiannually. All coupon payments are reinvested at a nominal rate of 6% convertible semiannually. Calculate the net gain to the investor at the end of 20 years after the loan is repaid.

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Calculation of net gain to investor is shown below

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