Bond Selling Price and Rate of Return
Lamar Baily purchased a 7% coupon corporate bond that matured in 10 years and paid interest semiannually. He paid $2800 and 6 months later, immediately following an interest payment, he sold the bond. At the time of the sale, the market interest rate on bonds of this type was 6%. What was Baily’s selling price? What was Baily’s rate of return for the 6 months? What is this return on an annual basis?