Question

**5. Suppose this year you buy 1.5% coupon rate, $10,000
face value bond for $10,100 that has 3 years left till maturity.
Suppose next year market interest rates increase to 2.0% and you
decide to sell it your bond that year.**

**a) Calculate the selling price of your bond next year.
In another words, what price would make your bond competitive when
market yields are at 2.0%?**

**b) Given the selling price from part (a), what was your
annual rate of return from owning this bond? You can assume you
kept a single coupon payment during the year you owned the
bond.**

Answer #1

. Suppose in 2020 you buy 2% coupon rate, $1000 face value bond
for $1000 that has 3 years left till maturity. Suppose in 2021,
when interest rates increase to 5%, you decide to sell it. a)
Calculate the selling price of your bond in 2021. How did its value
change because of the interest rate increase? What was your
one-year rate of return?

Suppose in 2020 you buy 2% coupon rate, $1000 face value bond
for $1000 that has 3 years left till maturity. Suppose in 2021,
when interest rates increase to 5%, you decide to sell it. a)
Calculate the selling price of your bond in 2021. How did its value
change because of the interest rate increase?
b) What was your one-year rate of return?

Suppose that you bought a four year coupon bond with $10,000
face value, 6% coupon rate and 7% yield to maturity. After holding
it for a year and collecting the first coupon payment you decide to
sell it. Calculate the return (in %) on this investment if the
interest rate has just
dropped to 5%.
With Formula's Please

1. Suppose that you own a $1,000-face-value coupon bond which
had a 10% coupon rate and 10 years to maturity. Moreover, its
current price is $1,000.
A.What is the yield to maturity?
B.Now suppose that the investors expect the interest rate will
rise to 13% in next year. What will be the bond price next
year?
C.Calculate thecurrent yield,the expected rateof capital
gain(2pts),and the expected rate of return if you have to sell this
bond next year.

8.You buy a bond with $1,000 face value, 2 years to maturity and
a 5% coupon rate.
The market interest rate is 6%. What price are you willing to
pay?
After 1 year, you cash in the coupon payment, and you sell the
bond again. Market interest rates are now 3%. What price can you
now sell the bond for?
What is your rate of return after 1 year?
Question options:
Buying price: About $981.67
Selling price: $981.67
Rate of...

A. You buy a 10-year US Treasury Bond with a coupon interest
rate of 5% and Face Value of $1,000. You decide to sell your bond
four years later when market interest rates have fallen to 4%. Find
the selling price of the bond.
B. Calculate the Annualized Holding Period Return on the
investment. Show your work.

A. You buy a 10-year US Treasury Bond with a coupon interest
rate of 5% and Face Value of $1,000. You decide to sell your bond
four years later when market interest rates have fallen to 4%. Find
the selling price of the bond.
B. Calculate the Annualized Holding Period Return on the
investment. Show your work.

Suppose a 5-year bond with a 5% coupon rate, semiannual coupons
and a face value of $1000 has a yield to maturity of 8% APR.
What is the bond’s yield to maturity expressed as an effective
semi-annual rate? What is the bond’s yield to maturity expressed as
an effective annual rate (EAR)?
What is the price of the bond?
If the bond’s yield to maturity changes to 5% APR, what will the
bond’s price be?

suppose there is a bond with 5% semi-annual coupon payments and
a face value of $1000. there are 10 years to maturity and the
yields to maturity are 7 % what is the price of this bond? show
your calculations.

) Consider a 4-year, 5% annual coupon bond with a face value of
$10,000, which was issued three years ago. The bond just paid the
coupon. Therefore, this bond has one year to maturity, and the next
payment of the face and coupon will be made in exactly one year,
after which the bond will cease to exist. If the bond defaults
before next year, it will pay total of $8,000 in one year. The
effective 1-year risk-free rate is...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 9 minutes ago

asked 10 minutes ago

asked 19 minutes ago

asked 19 minutes ago

asked 33 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago