Wojtek Purchased a $10,000 Face Value Strip Bond on a Date

question 255

Short Answer

Wojtek purchased a $10,000 face value strip bond on a date when it had 14 years left until maturity. The purchase price was based on a market yield of 6.2% compounded semi-annually. He sold the bond 4 years later when the market yield was 5.2% compounded semi-annually. What was Wojtek's total gain on the investment?

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Definitions:

Monopoly Model

An economic model describing a market where a single seller controls the market supply of a product which has no close substitutes.

Cooperative Housing

A type of residential community where residents have a collective ownership of the property and participate in its management and maintenance.

Condominiums

A form of property ownership where individual units of a larger complex are owned by individuals, including shared access to common facilities.

Co-op Owners

Individuals or entities that own shares in a cooperative, entitling them to use its goods, services, or facilities and participate in its governance.