“A bond has the following features: Principal: $1,000 Coupon rate of interest: 7% Term to maturity: 15 years Sinking fund:

“A bond has the following features:• Principal: $1,000• Coupon rate of interest: 7%• Term to maturity: 15 years• Sinking fund: 5% of outstanding bonds retired annually; the balance at maturitya. If you buy the bond today at its face amount and interest rates rise to 12% after 3 years have passed, what is your capital gain (loss)?b. If you hold the bond 15 years, what do you receive at maturity?c. What is the bonds current yield as of right now?

SOLUTION:a) Future ValuePar ValuePresent ValueCoupon RateNper $1,000.00$1,000.00$1,000.007.00%15.00 PMT = Par Value * Coupon RatePMT = $1,000 * 7%PMT $70.00 Yield 7.00% Value after 3…

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