Question

You bought a 10-year, 5% coupon bond for $1000, and sold it 1 year later for $1,100. What is the rate of return on your investment if the bond pays interest annually? Semi-annually?

Answer #1

Answer a.

Purchase Price = $1,000

Selling Price = $1,100

Annual Coupon = 5%*$1,000 = $50

Rate of Return = (Selling Price + Annual Coupon - Purchase
Price) / Purchase Price

Rate of Return = ($1,100 + $50 - $1,000) / $1,000

Rate of Return = 0.15

Rate of Return = 15%

Answer b.

Purchase Price = $1,000

Selling Price = $1,100

Annual Coupon = 5%

Semiannual Coupon = 2.5%*$1,000 = $25

Semiannual Rate of Return = [(Selling Price + 2 * Semiannual
Coupon - Purchase Price) / Purchase Price + 1]^(1/2) - 1

Semiannual Rate of Return = [($1,100 + 2 * $25 - $1,000) / $1,000 +
1]^(1/2) - 1

Semiannual Rate of Return = (0.15 + 1)^(1/2) - 1

Semiannual Rate of Return = 1.15^(1/2) - 1

Semiannual Rate of Return = 1.0724 - 1

Semiannual Rate of Return = 7.24%

Annual Rate of Return = 2 * 7.24%

Annual Rate of Return = 14.48%

Question 7
You bought a 10-year, 5% coupon bond for $1,000 and sold it 1
year later for $1,050.
What is the rate of return on your investment if the bond pays
interest annually?
If your marginal tax rate is 35%, and 50% of capital gains are
taxable, what is the after-tax rate of return on your bond
investment?

You bought a 5-year annual payment
corporate bond with a market price of $1000. The bond pays annual
interest of $100, by how much your bond is mispriced if
The required rate of return on your investment is 10%?
The required rate of return on your investment is 12%?

you
bought a 15 year bond for $1200 and then sold the bond for 1385
five years later it was a 10% coupon bond with a par value of 1000
what is your HPR or rate of return over the five year period on
this coupon paying bonds

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.)

1)
how much should you pay for a $1000 bond with 6% coupon, annual
payments, and 16 years to maturity if the interested rate is 6%?
2) how much should you pay for a $1000 zero coupon bond with 5
years to maturity if the interest rate is 5%?
3) what is the rate of return for an investor who pays $1061
for a 3 year bond with an annual coupon payment of 6% and sells the
bond 1 year...

You
bought a bond exactly one year ago for $1,004.50. Today, you sold
the bond at a price of $987.40. The bond paid interest
semi-annually at a coupon rate of 6%. What is your holding period
yield on this bond?

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!

If a bond has face value $1000, annual coupon rate of 10% is
bought for $900 and sold 2 years later for $1100 what is holding
period return? Annualized return?

On the issue date, you bought a 30-year maturity, 8% semi-annual
coupon bond. The bond then sold at YTM of 7%. Now, five years
later, the similar bond sells at YTM of 6%. If you hold the bond
now, what is your realized rate of return for the 5-year holding
period? (do not solve using excel)

Nathan owns $1000 par value of Caterpillar bonds.The bond has a
5% coupon rate, pays interest semi-annually, has 10 years to
maturity and is currently priced at $1,100. What is the yield to
maturity for this bond?
A) 1.89%
B) 3.78%
C) 5.00%
D) 6.25%

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