Problem:
A 12-year bond with a 9% coupon rate, $1,000 face value and semi-annual coupon payments was issued by Fancy Car Ltd five years ago. You bought this bond two years ago when the semi-annually compounded market interest rate was 7% (APR).
Required:
Question 1: How much did you pay for the bond?
Question 2: If you are going to sell the bond in two years (i.e. after having owned it for four years), and the interest rate is 10% (APR) two years from now, what will be your capital gain/loss yield?
Note: Please show guided help with steps and answer.