Question

Problem 13-10 You are given the following information concerning a noncallable, sinking fund debenture: • Principal: $1,000 • Coupon rate of interest: 8 percent · Term to maturity: 12 years • Sinking fund: 3 percent of outstanding bonds retired annually; the balance at maturity a. If you buy the bond today at its face amount and interest rates rise to 13 percent after two years have passed, what is your capital gain or loss? Assume that the bond pays interest annually. Use Appendix B and Appendix D to answer the question. Use a minus sign to enter the loss amount, if any, as a negative value. Round your answer to the nearest dollar.

Answer 1

Capital gain = -$271.31