Question

Baron buys a bond whose Par=$1,000, Coupon=6%, semiannually paid, Maturity=8 years, and Price= $1,000. He invests the coupons at a uniform rate of 3% per six months until he sells the bond at t=2years, shortly after receiving the fourth semiannual coupon. If Barons realized return turns out to be 7% per year, what was the bond’s YTM at the time of its sale at t=2 years?

Answer #1

Accumulated value at maturity:

N=2

PMT=0

PV=-1000

I/Y=7%

CPT FV=1144.90000

Total coupon payments: =6%*1000/2*2*2=120.00000

Reinvestment income from coupons:

N=2*2

I/Y=6%/2

PMT=-6%*1000/2

PV=0

CPT FV=125.50881

Reinvestment income=125.50881-120.000=5.50881

Total value at 2 years: =x+120+5.50881

=>x+120+5.50881=1144.90000

=>x=1144.90000-120-5.50881

=>x=1019.39119

YTM after 2 years:

N=6*2

PMT=-6%*1000/2

FV=-1000

PV=1019.39119

CPT I/Y=2.8074%

YTM at the time of sale=2.8074%*2=5.6148%

A $1,000 par value bond has an 8% coupon rate (paid
semiannually). It has 5 years remaining to
maturity. If bond’s current price $1,085.30, what should be the
YTM of this bond?
Group of answer choices
6%
7.37%
3%
3.69%

A $1,000 par value bond has an 8% coupon rate (paid
semiannually). It has 5 years remaining to maturity. If bond’s
current price $1,085.30, what should be the YTM of this bond? Group
of answer choices A)7.37% B)3.69% C)3% D)6%

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1. Today, a bond has a coupon rate of 8.18 percent, par value of
1,000 dollars, YTM of 6 percent, and semi-annual coupons with the
next coupon due in 6 months. One year ago, the bond’s price was
1,022.04 dollars and the bond had 19 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
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2....

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is selling for $1,050.
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c.What is the bond’s capital gains rate or yield (CGY)?

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with five years until maturity. The euro bond pays semiannual
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2. Today, a bond has a coupon rate of 8.4 percent, par value of
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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
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3....

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