Financial Institution has purchased following T/Bond. After the purchase market rates have gone up drastically.Therefore FI has decided to keep the Bond until maturity.What’s the best solutuon to overcome capital loss?
Face Value 150,000,000
Purchase Price 109.0960
Purchase Yield 9.00%
Coupon Rate 11%
Coupon mehtod -Semiannual
Maturity Date 01/August/2021
Calculation Date 30/April/2016
Can anyone tell me whether anything is missing in the below solution?
Calculation-
# of remaning coupons 11
If 11 remaining coupons are invested at 13.32% Future Value of coupon interest = 13,702,408
If the bond is held untill maturity, Capital Gain= Capital loss of 13,644,000 {100-109.096*Face Value/100}
Assuming that semiannual coupons(8,250,000) are loaned out at 13.32% every six months then future value of coupon interest are 13,702,408
Then net int income = 13702408-13644000= 58,408
Solution-
If semiannual coupons are loaned out to customers at 13.32% FI can make Net int income of 58,408.
Face Value 150,000,000
Purchase Price 109.0960
Purchase Yield 9.00%
Coupon Rate 11%
Coupon mehtod -Semiannual
Maturity Date 01/August/2021
Calculation Date 30/April/2016
Can anyone tell me whether anything is missing in the below solution?
Calculation-
# of remaning coupons 11
If 11 remaining coupons are invested at 13.32% Future Value of coupon interest = 13,702,408
If the bond is held untill maturity, Capital Gain= Capital loss of 13,644,000 {100-109.096*Face Value/100}
Assuming that semiannual coupons(8,250,000) are loaned out at 13.32% every six months then future value of coupon interest are 13,702,408
Then net int income = 13702408-13644000= 58,408
Solution-
If semiannual coupons are loaned out to customers at 13.32% FI can make Net int income of 58,408.