There is a $1,000-face-value bond with five years to maturity and a yearly coupon payment of $50,and the interest rate is 5%.
(i) Show the present value is $1,000 when it is issued.
(ii) After four years of holding the bond, the market interest rate has risen to 10%.Should the bond owner consider selling the bond or keep it until the maturity date?
You need to caculate the rate of return on this bond to answer the question.
(Please show all your calculation process clearly in detail, your answer should base on calculation result but not a personal judgement.)