Question

Over the past year (from one year ago to today), the inflation rate was 4.13%, the...

Over the past year (from one year ago to today), the inflation rate was 4.13%, the risk-free rate was 6.08%, and the real rate of return for a bond was 3.17%. The bond is currently priced at $974.00, pays annual coupons of $84.70, and just made a coupon payment. What was the price of the bond one year ago?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Real Return = 3.17%
Inflation Rate = 4.13%

Nominal Return = (1 + Real Return) * (1 + Inflation Rate) - 1
Nominal Return = (1 + 0.0317) * (1 + 0.0413) - 1
Nominal Return = 1.07431 - 1
Nominal Return = 0.07431 or 7.431%

Current Price = $974.00
Coupon = $84.70

Nominal Return = (Current Price + Coupon - Price 1 year ago) / Price 1 year ago
0.07431 = ($974.00 + $84.70 - Price 1 year ago) / Price 1 year ago
0.07431 * Price 1 year ago = $1,058.70 - Price 1 year ago
1.07431 * Price 1 year ago = $1,058.70
Price 1 year ago = $985.47

So, price of bond one year ago is $985.47

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Over the past year (from 1 year ago to today), the inflation rate was 5.26 percent,...
Over the past year (from 1 year ago to today), the inflation rate was 5.26 percent, the risk-free rate was 7.86 percent, and the real rate of return for a bond was 9.38 percent. The bond was priced at 1,192.22 dollars one year ago and 1,212.7 dollars two years ago, pays annual coupons of 50.99 dollars, and just made a coupon payment. What is the price of the bond today?
Over the past year (from 1 year ago to today), the inflation rate was 6.63 percent,...
Over the past year (from 1 year ago to today), the inflation rate was 6.63 percent, the risk-free rate was 8.31 percent, and the real rate of return for a bond was 9.2 percent. The bond was priced at 1,124.65 dollars one year ago and 1,148.58 dollars two years ago, pays annual coupons of 47.51 dollars, and just made a coupon payment. What is the price of the bond today?
What was the real rate of return over the past year (from one year ago to...
What was the real rate of return over the past year (from one year ago to today) for a stock if the inflation rate over the past year was 3.36 percent, the risk-free return over the past year was 5.58 percent, the stock is currently priced at 68.57 dollars, the stock was priced at 63.28 dollars 1 year ago, and the stock just paid a dividend of 1.19 dollars? Answer as a rate in decimal format so that 12.34% would...
One year ago, you bought a bond at a price of $992.6000.The bond pays coupons semi-annually,...
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)
#12 Bonds issued by Oxygen Optimization were priced at 906.89 dollars 6 months ago. The bonds...
#12 Bonds issued by Oxygen Optimization were priced at 906.89 dollars 6 months ago. The bonds pay semi-annual coupons, have a coupon rate of 13.04 percent, just made a coupon payment, and have a face value of 1,000 dollars. If the bonds had a percentage return over the past 6 months (from 6 months ago to today) of 2.25 percent, then what is the current yield of the bonds today? Answer as a rate in decimal format so that 12.34%...
(a)       Consider a 14-year, 9.5% corporate bond with face value $10,000. Assume that the bond pays...
(a)       Consider a 14-year, 9.5% corporate bond with face value $10,000. Assume that the bond pays semi-annual coupons. Compute the fair value of the bond today if the nominal yield-to-maturity is 11% compounded semi-annually. (b)       Consider a 11-year, corporate bond with face value $1,000 that pays semi-annual coupon. With the nominal yield-to-maturity equal to 10%, the bond is selling at $802.5550. Find the coupon rate for this bond. Assume that the market is in equilibrium so that the fair value...
Suppose you bought a bond with an annual coupon rate of 8.3 percent one year ago...
Suppose you bought a bond with an annual coupon rate of 8.3 percent one year ago for $906. The bond sells for $944 today. If the inflation rate last year was 4.3 percent, what was your total real rate of return on this investment?
Bonds issued by XYZ have a par value of $1000, were priced at $1,140.00 six months...
Bonds issued by XYZ have a par value of $1000, were priced at $1,140.00 six months ago, and are priced at $1,060.00 today. The bonds pay semi-annual coupons and just made a coupon payment. If the bonds had a percentage return over the past 6 months (from 6 months ago to today) of -2.10%, then what is the current yield of the bonds today?
One year ago, you purchased an 8% coupon rate bond when it was first issued and...
One year ago, you purchased an 8% coupon rate bond when it was first issued and priced at its face value of $1,000. Yesterday the bond paid its second semi-annual coupon. The bond currently has 7 years left until maturity and has a yield to maturity of 12%. If you sell the bond today, what will your return have been from this investment during the year you held the bond and collected the coupon payments?
2. Today, a bond has a coupon rate of 8.4 percent, par value of 1,000 dollars,...
2. Today, a bond has a coupon rate of 8.4 percent, par value of 1,000 dollars, YTM of 4.82 percent, and semi-annual coupons with the next coupon due in 6 months. One year ago, the bond’s price was 1,041.94 dollars and the bond had 17 years until maturity. What is the current yield of the bond today? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098. 3....
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT