Question

Last year, you purchased a $1,000 par value bond with a 7% annual coupon and a 20-year maturity. At the time of the purchase, it had an expected YTM of 7.5%. After receiving the coupon, you sold the bond today for $920. What is your return rate in one year? (Hint: find out how much did you pay for the bond last year?)

Select one: a. 5.37% b. 9.18% c. 3.27% d. 4.32% e. 10.64%

Answer #1

Given about a bond,

Bond was purchased last year with following features,

Face value = $1000

coupon rate = 7%

years to maturity = 20 years

YTM = 7.5%

So price of the bond last year can be calculated on financial calculator using following values:

FV = 1000

N = 20

PMT = 7% of 1000 = 70

I/Y = 7.5

Compute for PV, we get PV = -949.03

So, bond was purchased for $949.03

today after the coupon payment, bond was sold for $920

So, return over the year = (920 + 70 - 949.03)/949.03 = 4.32%

Option d is correct.

Consider a $1,000 par value bond with a 9% annual coupon. The
bond pays interest annually. There are 20 years remaining until
maturity. You have expectations that in 5 years the YTM on a
15-year bond with similar risk will be 7.5%. You plan to purchase
the bond now and hold it for 5 years. Your required return on this
bond is 10%. How much would you be willing to pay for this bond
today?
Select one:
a. $1044
b....

Consider a $1,000 par value bond with a 9% annual coupon. The
bond pays interest annually. There are 20 years remaining until
maturity. You have expectations that in 5 years the YTM on a
15-year bond with similar risk will be 7.5%. You plan to purchase
the bond now and hold it for 5 years. Your required return on this
bond is 10%. How much would you be willing to pay for this bond
today?
Select one:
a. $1132
b....

Last year Janet purchased a $1,000 face value corporate bond
with an 7% annual coupon rate and a 20-year maturity. At the time
of the purchase, it had an expected yield to maturity of 13.05%. If
Janet sold the bond today for $1,133.42, what rate of return would
she have earned for the past year?

Last year Janet purchased a $1,000 face value corporate bond with
an 7% annual coupon rate and a 15-year maturity. At the time of the
purchase, it had an expected yield to maturity of 7.42%. if janet
sold the bond today for $991.19, what rate of return would she have
earned for the past year? round your answer to two decimal
places.

You purchased a $1,000 par value 20-year 4% coupon bond
with semi-annual payments for $1,000. Immediately after the
purchase, interest rates increased and the yield to maturity and
coupon reinvestment rate increased to 6%. (the coupons themselves
stayed at 4%) Interest rates and the yield to maturity remain at 6%
and you sell the bond 5 years later, having reinvested the coupons
at 6%. How much is in your account (proceeds from bond sale and
value of all coupons after...

1.)
Last year Janet purchased a $1,000 face value corporate bond
with an 8% annual coupon rate and a 15-year maturity. At the time
of the purchase, it had an expected yield to maturity of 12.09%. If
Janet sold the bond today for $1,055.86, what rate of return would
she have earned for the past year? Do not round intermediate
calculations. Round your answer to two decimal places.
2.)
Bond X is noncallable and has 20 years to maturity, a...

Last year Janet purchased a $1,000 face value corporate bond
with a 7% annual coupon rate and a 20-year maturity. At the time of
the purchase, it had an expected yield to maturity of 6.89%. If
Janet sold the bond today for $1,100.22, what rate of return would
she have earned for the past year? Do not round intermediate
calculations. Round your answer to two decimal places.
%

Last year Janet purchased a $1,000 face value corporate bond
with an 7% annual coupon rate and a 10-year maturity. At the time
of the purchase, it had an expected yield to maturity of 12.5%. If
Janet sold the bond today for $1,137.79, what rate of return would
she have earned for the past year? Do not round intermediate
calculations. Round your answer to two decimal places.
________%

Last year Janet purchased a $1,000 face value corporate bond
with an 7% annual coupon rate and a 25-year maturity. At the time
of the purchase, it had an expected yield to maturity of 12.54%. If
Janet sold the bond today for $1,091.2, what rate of return would
she have earned for the past year? Do not round intermediate
calculations. Round your answer to two decimal places.

1, A $1,000 par value bond with a 6% coupon rate is currently
selling for 90. This bond has 15 years remaining before it matures.
If you purchase this bond today and hold it to maturity, what YTM
will you earn?
2, A $1,000 par value bond with a 8% coupon rate is currently
selling for 110. This bond has 20 years remaining before it
matures. If you purchase this bond today and hold it to maturity,
what YTM will...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 7 minutes ago

asked 23 minutes ago

asked 32 minutes ago

asked 1 hour ago

asked 1 hour 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