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Business, 26.08.2020 16:01 Armendariz1

An investor borrows an amount at an annual effective interest rate of 5% and will repay all interest and principal in a lump sum at the end of 10 years. She uses the amount borrowed to purchase a 1000 par value 10-year bond with 8% semiannual coupons bought to yield 6% convertible semiannually. All coupon payments are reinvested at a nominal rate of 4% convertible semiannually. Calculate the net gain to the investor at the end of 10 years after the loan is repaid

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