We are considering purchasing a 7% coupon bond (coupons paid semiannually) with 14 years remaining to maturity for 102-21 (priced in 32nds). We can reivest the coupon payments at 4% and we expect to sell the bond after 3-year holding period for 106-16 (priced in 32nds).1. What is the the future value of the annuity from the re-invested coupons?2. The holding period yield for the 3 year investment horizon?3. Recommendation as to whether the company should purchase the candidate bond if your required return is 6%?
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