Question

Suppose an investor can purchase a 20 year, 5% coupon bond that pays interest semi annually and the price of the bond is 97%. The Par Amount is $100. The yield to maturity is 5.95%. Assume the investor can reinvest the coupon payments at an annual rate of 3%. The bond is only held for 5 years and sold at 89%. Compute the following:

What is the Total Coupon plus Interest on Interest in Dollars?

What is the (Total Interest on Interest) component in Dollars?

What is the Total Rate of Return (in percent) on this bond when sold after 5 years?

What is the Total Accounting Rate of Return (semiannual equivalent) in percent?

Answer #1

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Suppose that an investor with a 10-year investment horizon is
considering purchasing a 20-year 8% coupon bond selling for $900.
The parvalue of the bond is $1000. The original YTM on the bond is
10%, but the investor expects that he can reinvest the coupon
payments at an annual interest rate of 7% and that at the end of
the investment horizonthis 10-year bondwill be selling to offer a
yieldof 9%. What is the total return for this bond?
Step...

Suppose an investor can purchase a 6-year 9% coupon bond with a
par value of $100 that pays interest semi-annually. The yield to
maturity for this bond is 10% on a bond-equivalent yield basis.
What is the coupon interest, capital gain/loss and reinvestment
income associated with this bond over its 6-year life? Assume that
the reinvestment rate is equal to the yield to maturity.

Suppose an investor can purchase a 6-year 9% coupon bond with a
par value of $100 that
pays interest semi-annually. The yield to maturity for this bond is
10% on a bond-equivalent yield basis.
What is the coupon interest, capital gain/loss and reinvestment
income associated with this bond over
its 6-year life? Assume that the reinvestment rate is equal to the
yield to maturity.

You purchase a 8 - year bond for $1,015. It pays a semi-annual
coupon payment of $40. You expect to sell the bond in 2 years. You
estimate that similar bonds will be priced to yield 7% at the time
of the sale. If you can reinvest the coupon payments at 6%
annually, what is your expected total return for the 2 - year
holding period?
1)
9.23%
2)
5.73%
3)
7.58%
4)
8.71%
5)
6.59%

5. A bond that yields 6% pays a coupon of $20 semi-annually.
Which of the following is most likely the price of the bond?
6. What is the coupon rate for the bond? Assume semi-annual
payments. Answer as a percent!
Bond
Coupon Rate
Yield
Price
t
Apple B
?
5.1%
1012.5
14
semi annual means 6 months.

a
three-year 9% coupon bond that pays interest semiannually is
trading at par of $5000. you buy the bond expecting to hold it to
maturity abd believe you can reinvest the semi-annual coupon
payment at 3.5% semi-annual rate through maturity. what is the
total return on this investment annually?

A $5,000 bond had a coupon rate of 5.50% with interest paid
semi-annually. Ali purchased this bond when there were 6 years left
to maturity and when the market interest rate was 5.75% compounded
semi-annually. He held the bond for 3 years, then sold it when the
market interest rate was 5.25% compounded semi-annually.
a. What was the purchase price of the bond?
Round to the nearest cent.
b. What was the selling price of the bond?
Round to the...

a) The ARA Corporation bonds have a coupon of 14%, pay interest
semi-annually, and they will mature in 7 years. Your required rate
of return for such an investment is 10% annually.
i) How much should you pay for a $1,000 ARA Corporation bond?
ii) If you are given RM90, 000, how many units of bond can you
purchase?
iii) What is the yearly interest income for this bond if I
purchase it with RM90, 000?
iv)You plan to reinvest...

One year ago, you bought a bond at a price of $992.6000.The bond
pays coupons semi-annually, has a coupon rate of 6% per year, a
face value of $1,000 and would mature in 5 years. Today, the bond
just paid its coupon and the yield to maturity is 8%. What is your
holding period return in the past year? (suppose you did not
reinvest coupons)

A $1,000 par-value bond with 5 years of maturity pays a 5%
coupon rate, paid annually. What is the value of the bond if your
required rate of return is 5%?
2. A $1,000 par-value bond with 5 years of
maturity pays a 5% coupon rate, paid semi-annually. What is the
value of the bond if your required rate of return is 5%?
3. A $1,000 par-value bond with 5
years of maturity pays a 5% coupon rate, paid semi-annually. What...

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