A government bond matures in 7 years, makes annual coupon payments of 5.1% and offers a...

A government bond matures in 7 years, makes annual coupon payments of 5.1% and offers a yield of 3.1% annually compounded. Assume face value is $1,000. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

a. Suppose that one year later the bond still yields 3.1%. What return has the bondholder earned over the 12-month period?

b. Now suppose that the bond yields 2.1% at the end of the year. What return did the bondholder earn in this case?

Solutions

Expert Solution

jeff jeffy answered 4 months ago

Next > < Previous

Related Solutions

A government bond matures in 8 years, makes annual couponpayments of 5.2% and offers a...

A government bond matures in 8 years, makes annual coupon payments of 5.2% and offers a yield of 3.2% annually compounded. Assume face value is $1,000. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)a. Suppose that one year later the bond still yields 3.2%. What return has the bondholder earned over the 12-month period?b. Now suppose that the bond yields 2.2% at the end of the year. What return did the bondholder...

A bond has a 10percent coupon rate, makes annual payments, matures in 12 years, and has...

A bond has a 10percent coupon rate, makes annual payments, matures in 12 years, and has a yield-to-maturity of 7percent. 1.Given this: a. What is the price of the bond today? b. What is the bond’s current yield? c. Based on the yield-to-maturity and the current yield, what is the bond’s expected capital gains yield over the next year?

A bond has a 10 percent coupon rate, makes annual payments, matures in 12 years, and...

A bond has a 10 percent coupon rate, makes annual payments, matures in 12 years, and has a yield-to-maturity of 7 percent. 1. Eleven years from now the bond will have 1 year until maturity. Assume market interest rates are at 7 percent, the same place they were when the bond was issued. Given this: k. What will be the bond’s price 11 years from now? l. What will be the current yield eleven years from now? m. What is...

A bond has a 10 percent coupon rate, makes annual payments, matures in 12 years, and...

A bond has a 10 percent coupon rate, makes annual payments, matures in 12 years, and has a yield-to-maturity of 7 percent. One year from now the bond will have 11 years until maturity. Assume market interest rates decrease to 5 percent. Given this: i. What will be the bond’s price one year from now? j. If you purchased the bond at the price in (a) and sold the bond at the price in (i) what would be your capital...

Bond A is a 6 % coupon bond and makes annual payments with 10 years to...

Bond A is a 6 % coupon bond and makes annual payments with 10 years to maturity. Bond B is a 6% coupon bond and makes annual payments with 20 years to maturity. Both bonds have a market required return of 10% and face value of 1,000. b) What will happen to the prices of both bonds if the interest rate increases by 2%? Explain

A bond offers an annual coupon rate of 5%, with interest paid semiannually. The bond matures...

A bond offers an annual coupon rate of 5%, with interest paid semiannually. The bond matures in seven years. The price of this bond per 100 of par value is 112.54, what is its yield-to-maturity?

A bond pays a 5% coupon and makes semi-annual payments. The bond has 10 years to...

A bond pays a 5% coupon and makes semi-annual payments. The bond has 10 years to maturity and a YTM of 6%. What is the current bond price?

A bond pays a 3% coupon and makes semi-annual payments. The bond has 20 years to...

A bond pays a 3% coupon and makes semi-annual payments. The bond has 20 years to maturity and a YTM of 8%. What is the current bond price?

What is the yield-to-maturity of a $1,000, 7% semi-annual coupon bond that matures in 20 years...

What is the yield-to-maturity of a $1,000, 7% semi-annual coupon bond that matures in 20 years and currently sells for $990? 7.7% 7.1% 3.55% 14.15%

a) Consider Bond C – a 4% coupon bond that has 10 years to maturity. It makes semi-annual payments and has a YTM of 7%

a) Consider Bond C – a 4% coupon bond that has 10 years to maturity. It makes semi-annual payments and has a YTM of 7%. If interest rates suddenly drop by 2%, what is the percentage change of the bond? What does this problem tell you about the relationship between interest rate and bond price? b) Consider another bond – Bond D, which is a 10% coupon bond. Similar to Bond C, it has 10 years to maturity. It...

Subjects