Question

on the issue date you bought a 20 year maturity 6% semiannual coupon Bond the bond then sold at YTM of 7% now four years later the similar Bond sells at YTM of 5% if you hold the bond now what is your realized rate of return for the 4-year holding.

Answer #1

Value of Bond =

Where r is the discounting rate of a compounding period i.e. 7%/2 = 3.5% _ _ (Semi Annual )

And n is the no of Compounding periods 20 year * 2 = 40 periods_ _ (Semi Annual )

Coupon 6%/2 = 3%

Value of 20 year Bond =

= 640.652170215 + 252.57246808

= $ 893.22

**Value of 16 year Bond**

Where r is the discounting rate of a compounding period i.e. 5%/2 = 2.5% _ _ (Semi Annual )

And n is the no of Compounding periods 16 year * 2 = 32 periods_ _ (Semi Annual )

Coupon 6%/2 = 3%

Value of 16 year Bond =

= 655.475338884 + 453.77055093

= $ 1109.25

Coupon Earned = 30 * (4 years * 2 ) = 240

Capital Gain = 1109.25 - 893.22 = 216.03

% Return = (Total Coupon Earned + Capital) / Purcahse Price

= (240 + 216.03) / 893.22

= 456.03 / 893.22

= 51.05%

On the issue date you bought a 20 year maturity, 6%
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Five years ago, Rock Steady Corp issued a semiannual coupon bond
with seven years until maturity. This bond was originally issued at
par with a $1,000 face value. The coupon rate on the bond is 8%.
Today, the yield-to-maturity (YTM) is 10%. Assume an investor
bought the bond at the time it was issued and sold it today. What
is the holding period return for the five year period of
investment? Please provide the formula you used, and show your...

Five years ago, Rock Steady Corp issued a semiannual coupon bond
with seven years until maturity. This bond was originally issued at
par with a $1,000 face value.
The coupon rate on the bond is 8%. Today, the yield-to-maturity
(YTM) is 10%.
Assume an investor bought the bond at the time it was issued and
sold it today. What is the holding period return for the five year
period of investment?
0.3389
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Five years ago, Rock Steady Corp issued a semiannual coupon bond
with seven years until maturity. This bond was originally issued at
par with a $1,000 face value.
The coupon rate on the bond is 8%. Today, the yield-to-maturity
(YTM) is 10%.
Assume an investor bought the bond at the time it was issued and
sold it today. What is the holding period return for the five year
period of investment? please provide step by step solution!

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