Question

The YTM on a bond is the interest rate you earn on your investment if interest...

The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY).

a. Suppose that today you buy an annual coupon bond with a coupon rate of 8.1 percent for $855. The bond has 7 years to maturity and a par value of $1,000. What rate of return do you expect to earn on your investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Two years from now, the YTM on your bond has declined by 1 percentage point, and you decide to sell.

b. What price will your bond sell for? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

What is the HPY on your investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Homework Answers

Answer #1

a. FV = 1000, PMT = 81, N = 7, PV = -855

use rate function in Excel

yield to maturity = 11.20%

b. N = 5, FV = 1000, PMT = 81, rate = 10.20%

Use PV function in Excel

price of the bond = 920.92

Cash flows Year
               (855.00) 0
                    81.00 1
              1,001.92 2

Use IRR function in Excel

HPY = 13.09%

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The YTM on a bond is the interest rate you earn on your investment if interest...
The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy an annual coupon bond with a coupon rate of 8.1 percent for $855. The bond has 7 years to maturity and a par value of $1,000. What rate of return do you expect to earn...
The YTM on a bond is the interest rate you earn on your investment if interest...
The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy an annual coupon bond with a coupon rate of 8.1 percent for $855. The bond has 7 years to maturity and a par value of $1,000. What rate of return do you expect to earn...
The YTM on a bond is the interest rate you earn on your investment if interest...
The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy a bond with an annual coupon of 11 percent for $1,200. The bond has 19 years to maturity. What rate of return do you expect to earn on your investment? Assume a par value of...
The YTM on a bond is the interest rate you earn on your investment if interest...
The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy a bond with an annual coupon of 10 percent for $1,190. The bond has 18 years to maturity. What rate of return do you expect to earn on your investment? Assume a par value of...
The YTM on a bond is the interest rate you earn on your investment if interest...
The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy a bond with an annual coupon of 9 percent for $1,180. The bond has 17 years to maturity. What rate of return do you expect to earn on your investment? Assume a par value of...
The YTM on a bond is the interest rate you earn on your investment if interest...
The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy a bond with an annual coupon of 11 percent for $1,130. The bond has 18 years to maturity. What rate of return do you expect to earn on your investment? Assume a par value of...
The YTM on a bond is the interest rate you earn on your investment if interest...
The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy a bond with an annual coupon of 11 percent for $1,060. The bond has 20 years to maturity. What rate of return do you expect to earn on your investment? Assume a par value of...
The YTM on a bond is the interest rate you earn on your investment if interest...
The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy a bond with an annual coupon of 6 percent for $1,150. The bond has 20 years to maturity. What rate of return do you expect to earn on your investment? (Do not round intermediate calculations...
The YTM on a bond is the interest rate you earn on your investment if interest...
The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy a bond with an annual coupon of 12 percent for $1,070. The bond has 12 years to maturity. What rate of return do you expect to earn on your investment? (Do not round intermediate calculations...
The YTM on a bond is the interest rate you earn on your investment if interest...
The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy a bond with an annual coupon rate of 6 percent for $1,150. The bond has 20 years to maturity. What rate of return do you expect to earn on your investment? Assume a par value...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT