Question

Suppose that you purchased a A rated $5,000 annual coupon bond with an 6.1% coupon rate and a 8-year maturity at par value. The current rate on 8-year US treasuries is 3%. Two years later, you sell the bond, and for a yield of 4.787%, what was your capital gain (+) or capital loss (-) in dollars and cents? (make your answer positive for a gain, negative for a loss)

Answer #1

Suppose that you purchased a A rated $5,000 annual coupon bond
with an 6.7% coupon rate and a 11-year maturity at par value. The
current rate on 11-year US treasuries is 3%. Two years later, you
sell the bond, and for a yield of 7.922%, what was your capital
gain (+) or capital loss (-) in dollars and cents? (make your
answer positive for a gain, negative for a loss)

A $5,000 annual coupon
bond with an 5.8% coupon rate and a 7-year maturity at par value.
The current rate on 7-year US treasuries is 3%. Two
years later, you sell the bond, and for a yield of 7.328%, what was
your capital gain (+) or capital loss (-) in dollars and cents?

Suppose that you purchased a A rated $5000 annual coupon bond
with an 6.9% coupon rate and a 13-year maturity at par value. The
current rate on 13-year US treasuries is 3%. Two years later, you
look in the newspaper, and find that the yield on comparable debt
is 9.345%, how much is the bond currently worth?

Suppose that you purchased a Baa rated $1000 annual coupon bond
with an 8.1% coupon rate and a 9-year maturity at par value. The
current rate on 9-year US treasuries is 3%. Two years
later, you look in the newspaper, and find that the yield on
comparable debt is 6.892%, how much is the bond currently
worth?

Suppose that you purchased a Baa rated $1000 annual coupon bond
with an 7.8% coupon rate and a 19-year maturity at par value. The
current rate on 19-year US treasuries is 3%. Two years later, you
look in the newspaper, and find that the yield on comparable debt
is 7.080%, how much is the bond currently worth?

Suppose that you just purchased a Baa rated $1000 annual coupon
bond with an 5.3 % coupon rate and a 4 -year maturity. If the yield
to maturity on the bond is 6.495 %, how much did you pay?

A $5000 annual coupon bond with an 5.3% coupon rate and a
18-year maturity at par value. The current rate on 18-year US
treasuries is 3%. Two years later, you look in the
newspaper, and find that the yield on comparable debt is 7.152%,
how much is the bond currently worth?

Suppose you purchase a 8-year AAA-rated Swiss bond for par that
is paying an annual coupon of 8 percent and has a face value of
2,200 Swiss francs (SF). The spot rate is U.S. $0.66667 for SF1. At
the end of the year, the bond is downgraded to AA and the yield
increases to 10 percent. In addition, the SF depreciates to U.S.
$0.74074 for SF1.
a.
What is the loss or gain to a Swiss investor who holds this...

One year ago, an investor purchased a 10-year, $1,000
par value, 8% semiannual coupon bond with an 8% yield to maturity.
Now, one year later, interest rates remain unchanged at 8%. If the
investor sells the bond today (immediately after receiving the
second coupon payment, and with no transaction costs), he will
have:
A. a capital gain of $80.
B. a capital loss of $80.
C. no capital gain or loss.

Suppose you purchase a 9-year AAA-rated Swiss bond for par that
is paying an annual coupon of 5 percent and has a face value of
1,900 Swiss francs (SF). The spot rate is U.S. $0.66667 for SF1. At
the end of the year, the bond is downgraded to AA and the yield
increases to 7 percent. In addition, the SF depreciates to U.S.
$0.74074 for SF1.
a.
What is the loss or gain to a Swiss investor who holds this...

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