Question

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.)*

Answer #1

Now, when the bond was issued, coupon rate = YTM. So issuance price = par value = $1000.

After 1 year, YTM falls to 4.4%. We need to calculate price of bond then.

where P is price of bond with periodic coupon C, M face value, periodic YTM i and n periods to maturity.

M = $1000, C = $64, n = 3, i = 4.4%

P = $176.27 + $878.82 = **$1,055.08**

Rate of Return = (Final Price - Initial Price + Coupon)/Initial Price

Rate of Return = (1055.08 - 1000 + 64)/1000 = 119.08/1000 =
**1.19%**

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.)

A. You buy a 10-year US Treasury Bond with a coupon interest
rate of 5% and Face Value of $1,000. You decide to sell your bond
four years later when market interest rates have fallen to 4%. Find
the selling price of the bond.
B. Calculate the Annualized Holding Period Return on the
investment. Show your work.

If a three-year bond with a $1,000 face value has a coupon rate of
3.5%, and if the current market interest rate is 2%, what is the
market price of the bond? (Do not include the dollar sign in your
answer, and round to two decimal places.)

Suppose you bought a 15-year $1,000 face-value bond for $945 one
year ago. The annual coupon rate is 7% and interest payments are
paid annually. If the price today is $995, the yield to maturity
must have changed from _____________ to ______________.
8.12%; 6.94%
7.12%; 8.11%
7.63%; 7.06%
9.11%; 9.35%
None of the above

Curtis bought an 8.5% annual coupon bond at par. One year later,
he sold the bond at a quoted price of 98. During the year, market
interest rates rose and inflation was 2.5%. What real rate of
return did Curtis earn on this investment?
a. 6.70% b. 6.50% c. 6.40% d. 3.90% e. 3.40%
ANS: D
Show steps please!

Suppose you bought a 8 percent coupon bond one year ago for
$1,050. The bond sells for $1,115 today.
Requirement 1: Assuming a $1,000 face value, what was your total
dollar return on this investment over the past year?
Requirement 2: What was your total rate of return on this
investment over the past year (in percent)?
Requirement 3: If the inflation rate last year was 5 percent,
what was your total "real" rate of return on this investment?
Assume...

Suppose you buy a bond with a coupon of 7.1 percent today for
$1,000. The bond has 16 years to maturity. Two years from now, the
YTM on your bond has increased by 2 percent, and you decide to
sell. What is the percentage realized rate of return? Assume that
interest payments are reinvested at the original YTM. The bond pays
coupons twice a year. (Do not round intermediate calculations.
Round your answer to 2 decimal places.)

Last year, Joan purchased a $1,000 face value corporate bond
with an 9% annual coupon rate and a 25-year maturity. At the time
of the purchase, it had an expected yield to maturity of 9.19%. If
Joan sold the bond today for $933.51, what rate of return would she
have earned for the past year? Round your answer to two decimal
places.

Last year, Joan purchased a $1,000 face value corporate bond
with an 8% annual coupon rate and a 25-year maturity. At the time
of the purchase, it had an expected yield to maturity of 9.08%. If
Joan sold the bond today for $1,106.92, what rate of return would
she have earned for the past year? 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 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.

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