Claire purchases an eight-year callable bond with a 10% annual coupon rate payable semiannually. The bond has a face value of 3,000 and a redemption value of 2,800. The purchase price assumes the bond is called at the end of the fourth year for 2,900, and provides an annual effective yield of 10.0%. Immediately after the first coupon payment is received, the bond is called for 2,960. Claire’s annual effective yield rate is i. Calculate i.

12.41%

Explanation:

yield to call = {coupon + [(call value - market value)/n]} / [(call value - market value)/2]

0.05 = {150 + [(2,900 - market value)/8]} / [(2,900 - market value)/2]

0.05 x [(2,900 - market value)/2] = 150 + [(2,900 - market value)/8]

0.05 x (1,450 + 0.5MV) = 150 + 362.5 - 0.125MV

72.5 + 0.025MV = 512.5 - 0.125MV

0.15MV = 440

MV = 440 / 0.15 = $2,933.33

Claire's total returns = $150 (coupon) + ($2,960 - $2,933.33) = $176.67

Claire's return on investment = $176.67 / $2,933.33 = 6.02273%

effective annual yield = (1 + 6.02273%)² - 1 = 12.41%

typically a loft will include modern kitchen and bathrooms, this increases the price tag. lofts also have a good amount of open space, this requires more heating and electricity. lofts are also in older buildings, this means that maintaining the location increases the bill. keep in mind this is without talking about the high state and property taxes.

i hope this you! : )