Suppose you buy the bond in the previous questions for $809.45. After you receive the...
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Suppose you buy the bond in the previous questions for $809.45. After you receive the sixth interest payment of $75, the issuing entity notifies the bondholders that it is declaring bankruptcy, and there will be no more payments made in the future to the bondholders. Use the Excel irr function to calculate the annual rate of return that you have earned over the 6-year period that you owned the bond.
a. 0.00%
b. -9.78%
c. 7.50%
d. 14.57%
What would happen to your answer if the bankruptcy happens after getting the Year 15 $75 interest payment? Explain why getting the maturity value is necessary for you to get the rate of return you want.
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