A 4.5% annuity bond of $50 000 with interest payable quarterly is to be redeemable at par in seven years with a yield 6% compounded quarterly. What is the gain or loss if the bond is sold six years after the date of purchase at 99.625?

Question

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The bond's purchase price is calculated using the yield rate of 6% compounded quarterly. After six years, the bond's value is calculated using the same yield rate. The difference between the selling price at 99.625 and the calculated value results in a gain of $535.20.

A 45% Annuity Bond of $50 000 with Interest Payable Quarterly