Question

A 14-year semiannual coupon bond with a YTM of 8.2% sells for par. If you buy...

A 14-year semiannual coupon bond with a YTM of 8.2% sells for par. If you buy the bond today and then sell it next year at a YTM of 7.7%, what is your capital gain on this investment? Enter your answer as a percentage rounded to two decimal places (e.g., 5.64%). (Please show step by step using N, I/Y, PV, PMT and FV on a calculator as well if needed.)

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Face Value = $1,000

Price of Bond, Current Year = $1,000

If current price of bond is equal to par value, then YTM will be equal to the coupon rate.

Annual Coupon Rate = 8.20%
Semiannual Coupon Rate = 4.10%
Semiannual Coupon = 4.10% * $1,000
Semiannual Coupon = $41

Calculation of next year price of bond:

Time to Maturity = 13 years
Semiannual Period = 26

Annual YTM = 7.70%
Semiannual YTM = 3.85%

Using financial calculator:
N = 26
I = 3.85%
PMT = 41
FV = 1000

PV = -1040.62

Price of Bond, Next Year = $1,040.62

Capital Gain Yield = (Price of Bond, Next Year - Price of Bond, Current Year) / Price of Bond, Current Year
Capital Gain Yield = ($1,040.62 - $1,000) / $1,000
Capital Gain Yield = 4.06%

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
What is the current yield (CY) of a 9-year, 5.4% coupon bond with a YTM of...
What is the current yield (CY) of a 9-year, 5.4% coupon bond with a YTM of 7.6 and annual coupon payments? Enter your answer as a percentage rounded to two decimal places (e.g., 5.64%). (Please show step by step using N, I/Y, PV, PMT and FV on a calculator as well if needed.)
Consider a 6.6% semiannual coupon bond with 10 years to maturity and a current price of...
Consider a 6.6% semiannual coupon bond with 10 years to maturity and a current price of $850. What will the price be in one year if the yield to maturity (YTM) remains constant? Round your answer to two decimal places. (Please show step by step using N, I/Y, PV, PMT and FV on a calculator as well if needed.)
A 10 year 8% coupon (semiannual) bond sells for $1,100, what is the bond holder's YTM?
A 10 year 8% coupon (semiannual) bond sells for $1,100, what is the bond holder's YTM?
1. West Corp. issued 15-year bonds two years ago at a coupon rate of 8.2 percent....
1. West Corp. issued 15-year bonds two years ago at a coupon rate of 8.2 percent. The bonds make semiannual payments. If these bonds currently sell for 103 percent of par value, what is the YTM? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) YTM = % 2. Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments....
What would you expect to pay for a 12-year bond with a 5.5% semiannual coupon and...
What would you expect to pay for a 12-year bond with a 5.5% semiannual coupon and yield to maturity of 4.0%? If this bond was callable in 10 years at a price of $1,060, what would be the yield to call?Fv=? N=? PMT=? pv=? i=?
Consider a 23-year bond with 6 percent annual coupon payments. The market rate (YTM) is 8.2...
Consider a 23-year bond with 6 percent annual coupon payments. The market rate (YTM) is 8.2 percent for this bond. The current yield of the bond is _______ percent. Answer it in percentage without the % sign, and round it to two decimal place, e.g., 5.69.
A 6 year bond with a YTM of 9.8% is currently selling at Par. If you...
A 6 year bond with a YTM of 9.8% is currently selling at Par. If you buy the bond today and then sell it in one year at a YTM of 8.8%, then what is your rate of return on this investment (one-year holding period return)?
A 14-year, 14% semiannual coupon bond with a par value of $1000 may be called in...
A 14-year, 14% semiannual coupon bond with a par value of $1000 may be called in 5 years at a call price of $1030. The bond sells for $1150 (assume the bond has just been issued). a. What is the bond's yield to maturity? b. What is the bond's current yield? c. What is the bond's capital gain or loss yield? d. What is the bond's yield to call?
A 15-year, semiannual coupon bond sells for $985.72. The bond has a par value of $1,000...
A 15-year, semiannual coupon bond sells for $985.72. The bond has a par value of $1,000 and a yield to maturity of 6.57 percent. What is the bond's coupon rate?
One year ago, you purchased a 6-year, 8% coupon bond at a YTM of 11%. Today...
One year ago, you purchased a 6-year, 8% coupon bond at a YTM of 11%. Today (one year later) you sold the bond at a YTM of 15%. What was your percentage capital gain on this investment?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT