Question

Suppose that you purchased a bond with a 4.9 percent coupon rate for $930 today. The bond matures in ten years and makes semiannual coupon payments.

Required:

a. What rate of return, expressed as an APR, do you expect to earn on your investment if you plan to hold it until maturity?

b. Two years from now, the yield-to-maturity on your bond has declined by 1 percentage point, and you decide to sell. How much will you get for your bond?

c. What is the holding-period-yield (the IRR) on your investment? Please express it as an APR.

Answer #1

b.Suppose a ten-year, $1,000 bond with an 8.8% coupon rate and
semiannual coupons is trading for $1,035.87.
a. What is the bond's yield to maturity (expressed as an APR
with semiannual compounding)?
b. If the bond's yield to maturity changes to 9.6% APR, what
will be the bond's price?
C. Suppose that General Motors Acceptance Corporation issued a
bond with 10 years until maturity, a face value of $1,000, and a
coupon rate of 7.6% (annual payments). The yield to...

Holding Period Yield [LO2] The YTM on a bond is the interest
rate you earn on your investment if interest rates don't change. If
you actually sell the bond before it matures, your realized return
is known as the holding period yield (HPY).
a. Suppose that today you buy a 7 percent annual coupon bond for
$1,060. The bond has 10 years to maturity. What rate of return do
you expect to earn on your investment?
b. Two years from...

1) Suppose a ten-year, $1000 bond with an 8.2% coupon rate and
semiannual coupons is trading for %1,035.49.
a. What is the bond's yield to maturity (expressed as an APR
with semiannual compounding)?
b. If the bond's yield to maturity changes to 9.9% APR, what
will be the bond's price?
2) Suppose a seven-year, $1,000 bond with an 8.2% coupon rate
and semiannual coupons is trading with a yield to maturity of
6.63%.
a. If the yield to maturity of...

You will earn the YTM on a bond if you hold the bond until
maturity and if interest rates don't change. If you actually sell
the bond before it matures, your realized return is known as the
holding period yield (HPY).
a. Suppose that today you buy a bond with an
annual coupon rate of 6 percent for $1,150. The bond has 20 years
to maturity. What rate of return do you expect to earn on your
investment? (Do not...

Suppose a ten-year, $ 1,000 bond with an 8.9 % coupon rate and
semiannual coupons is trading for $ 1,034.56
a. What is the bond's yield to maturity (expressed as an APR
with semiannual compounding)?
b. If the bond's yield to maturity changes to 9.9 % APR, what
will be the bond's price?

Suppose a ten-year, $ 1,000 bond with an 8.6 % coupon rate and
semiannual coupons is trading for $ 1,034.39.
a. What is the bond's yield to maturity (expressed as an APR
with semiannual compounding)?
b. If the bond's yield to maturity changes to 9.1 % APR, what
will be the bond's price?

Suppose a ten-year, $ 1,000 bond with an 8.6 % coupon rate and
semiannual coupons is trading for $ 1035.31.
a. What is the bond's yield to maturity (expressed as an APR
with semiannual compounding)? b. If the bond's yield to maturity
changes to 9.4 % APR, what will be the bond's price?

Suppose a ten-year, $ 1000 bond with an 8.4 % coupon rate and
semiannual coupons is trading for $ 1035.35.
a. What is the bond's yield to maturity (expressed as an APR
with semiannual compounding)?
b. If the bond's yield to maturity changes to 9.5 % APR, what
will be the bond's price?

Suppose that you invest in a two-year Treasury bond with a
coupon rate of 7% and $1,000 par. Suppose that you buy this bond at
a price of exactly $1,000. You intend to hold this bond to maturity
and reinvest the coupons until the bond matures. You expect to
reinvest the coupons in an account that pays an APR of 1.26%, with
semi-annual compounding. What is the effective annual rate of
return on your investment? Hint: see Example 8 in...

Suppose a ten-year, $1,000 bond with an 8.9% coupon rate and
semiannual coupons is trading for $1,035.45.
a. What is the bond's yield to maturity (expressed as an APR
with semiannual compounding)?
b. If the bond's yield to maturity changes to 9.2% APR, what
will be the bond's price?
a. What is the bond's yield to maturity (expressed as an APR
with semiannual compounding)?
The bond's yield to maturity is_____%. (Round to two decimal
places.)
b. If the bond's yield...

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