Bond X can be bought for $1000 and returned in three years for $1800. Bond Y...

Bond X can be bought for $1000 and returned in three years for $1800. Bond Y can be bought for $5000 and returned for $8000 in five years. Determine which bond has a higher annual rate of return. (Bond X: 21.64%; Bond Y: 9.86%)

Expert Solution

jeff jeffy answered 2 years ago

You bought a $1000 corporate bond for $910 three years ago. It is paying $25 in...

You bought a $1000 corporate bond for $910 three years ago. It is paying $25 in interest at the end of every 6 months, and it matures in 6 more years. (a) Compute its coupon rate. (b) Compute its current value, assuming the market interest rate for such investments is 4% per year, compounded semiannually.

You bought a 5% coupon, $1000 face value five-year bond at par three years ago. What...

You bought a 5% coupon, $1000 face value five-year bond at par three years ago. What annual return did you expect to make when you made that investment? At the beginning of the second year, the bond's discount rate rose to 12%. You sold the bond today. What average annual return did you make on that bond over the three years that you held it? (Please show work and formulas used. Do not use a finance calculator.)

Three years ago, you bought a 12% bond that had 7 years to maturity and a...

Three years ago, you bought a 12% bond that had 7 years to maturity and a yield to maturity of 12%. Today (after the sixth interest payment), you sold the bond when it is yielding 13%. What is your annual rate of return for the three year period? All coupon payments are semi-annual, and the par value is $1,000.

Bond X has exactly three years until it matures. Bond X is NOT a standard bond....

Bond X has exactly three years until it matures. Bond X is NOT a standard bond. It pays a yearly coupon of $120 every year. The yield-to-maturity (YTM) on similar debt instruments is 9.2 percent per year. a) If yields on such instruments should fall to 9.0 percent per year, estimate the new value of Bond X using concepts of duration. b) Calculate the "convexity correction" for this case.

A bond with three years to maturity has a face value of $1000 and a coupon...

A bond with three years to maturity has a face value of $1000 and a coupon rate of 3%. It is initially bought at a yield to maturity of 7% then sold after one year when market yields have fallen to 3%. What is the rate of return for the first year?

Last year, you bought a bond with face value $1000, maturity 20 years, coupon rate of...

Last year, you bought a bond with face value $1000, maturity 20 years, coupon rate of 7% per year payable semi-annually and yield to maturity of 5.5% per year. Currently the bond sells for $900. How much would be your total yield if you sell this bond today? (17.84%) (15.79%) 13.71% 10.78%.

Machine X costs £20,000 when bought new and can be replaced every year, two years, three...

Machine X costs £20,000 when bought new and can be replaced every year, two years, three years or four years. The following information is available. Year Realisable value when sold (£) Maintenance costs for the year (£) 1 17,500 1,200 2 14,000 1,500 3 9,000 1,900 4 7,000 2,300 Cost of capital is 10%. What is the optimal replacement policy? A Replace every year B Replace every two years C Replace every three years D Replace every four years

Jenna bought a bond that was issued by Sherlock Watson Industries (SWI) three years ago. The...

Jenna bought a bond that was issued by Sherlock Watson Industries (SWI) three years ago. The bond has a $1,000 maturity value, a coupon rate equal to 9 percent, and it matures in 17 years. Interest is paid every six months; the next interest payment is scheduled for six months from today. A) If the yield on similar risk investments is 11 percent, what is the current market value (price) of the bond? B) Compute the capital gains yield, current...

Values for a bond bought at par with face value $1000, with yield to maturity of...

Values for a bond bought at par with face value $1000, with yield to maturity of 5% initially, and 2% after 1 year. Values for a bond bought at par with face value $1000, with yield to maturity of 2% initially, and 5% after 1 year. Aug 28, 2018 10:49 AM Instructions The goal is to create a table for the rates or return on bonds of varying maturities like the one in the notes for Chapter 4. The bond...

Three years ago, you bought an 8% coupon bond with a 9-year remaining maturity for $936....

Three years ago, you bought an 8% coupon bond with a 9-year remaining maturity for $936. Today you sold the bond for $1,069. Given that the bond paid coupons semiannually, what was your effective annual rate of return on this investment?

Question