15 computecapitalgl p5p09201510007985capitalloss

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Unformatted text preview: mpute total interest (the coupon payments): Total interest = 5 x (0.06 x $1000) = 5 x $60 = $300 Compute interest on interest: N = 5 I/Y = 8 PV = 0 PMT = 60 CPT FV = ‐352.00 Interest‐on‐interest is equal to $351.00 ‐ $300.00 = $52.00 Compute the price at the end of year 5 first: N = 10 – 5 = 5 I/Y = 8 PMT = 60 (assume 1000 FV – this is arbitrary) FV = 1000 CPT PV = ‐920.15 The price at the end of year 5 is P5 = $920.15 Compute Capital G/L: P5 – P0 = $920.15 ‐ $1,000 = ‐$79.85 (capital loss) Compute total income: Total Income = Total Interest + Interest‐on‐Interest + Capital G/L = = $300.00 + $52.00 ‐$79.85 = $272.15 Compute realized yield: LECTURE NOTES #3...
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