Question

Suppose that you just bought a four-year $1,000 coupon bond with a coupon rate of 5.4% when the market interest rate is 5.4%. One year later, the market interest rate falls to 3.4%.

The rate of return earned on the bond during the year was _%

Answer #1

FAce value = 1000

years to maturity at time of purchase(n) =4

annual coupon amount = face value * coupon rate

=1000*5.4% = 54

required return (i) = 5.4%

Bond price formula = Coupon amount * (1 - (1/(1+i)^n)/i + face value/(1+i)^n

(54*(1-(1/(1+5.4%)^4))/5.4%) + (1000/(1+5.4%)^4)

=1000

So purchase price = $1000

After 1 year, years to maturity (n) =4-1 =3

annual coupon amount = face value * coupon rate

=1000*5.4% = 54

required return (i) = 3.4%

Bond price formula = Coupon amount * (1 - (1/(1+i)^n)/i + face value/(1+i)^n

(54*(1-(1/(1+3.4%)^3))/3.4%) + (1000/(1+3.4%)^3)

=1056.139946

1 year coupon received = $54

Holding period return = (Coupon received + Sale price - Buying price)/Buying price

(54+1056.139946- 1000)/1000

=0.110139946 or 11.0139946 %

So holding period return is 11.014%

Suppose that you just bought a four-year $1,000 coupon bond with a
coupon rate of 5.4% when the market interest rate is 5.4%. One year
later, the market interest rate falls to 3.4%.
The rate of return earned on the bond during the year was
_%

Suppose that you just bought a four-year $1,000 coupon bond
with a coupon rate of 6.4% when the market interest rate is 6.4%.
One year later, the market interest rate falls to
4.4%. The rate of return earned on the bond during the year was
x %.
(Round your response to two decimal places.)

Suppose that you just bought a four-year $1000 coupon bond
with a coupon rate of 5.7% when the market interest rate is 5.7%.
One year later, the market interest rate falls to 3.7%. The rate
of return earned on the bond during the year was nothing( )%.
(Round your response to two decimal places.)

Suppose that you just bought a four-year $1 000 coupon bond
with a coupon rate of 6.9% when the market interest rate is 6.9%.
One year later, the market interest rate falls to 4.9%.
The rate of return earned on the bond during the year was
the ans is 12.36%, can yo please show me the formla how
it is arrived at

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

Question 7
You bought a 10-year, 5% coupon bond for $1,000 and sold it 1
year later for $1,050.
What is the rate of return on your investment if the bond pays
interest annually?
If your marginal tax rate is 35%, and 50% of capital gains are
taxable, what is the after-tax rate of return on your bond
investment?

You bought a 10-year
zero-coupon bond with a face value of $1,000 and a yield to
maturity of 3.4% (EAR). You keep the bond for 5 years before
selling it.
The price of the bond
today is P0=F(1+r)T=1,0001.03410=P0=F(1+r)T=1,0001.03410= 715.8
If the yield to
maturity is still 3.4% when you sell the bond at the end of year-5,
what is your personal annual rate of return?

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year? What portion of the annual return represents capital gains
and what portion represents the current yield?
D) Suppose...

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