Question
In: Finance
A bond investor faces reinvestment risk if his or her holding period is (a) shorter than...
A bond investor faces reinvestment risk if his or her holding
period is
(a) shorter than the maturity of the bond.
(b) identical to the maturity of the bond.
(c) longer than the maturity of the bond.
(d) none of the above
justify answer
Solutions
Expert Solution
If the Maturity Period is shorter than Holding Period, the Maturity Value will be received early, and it will be required to be reinvested. But, if Maturity period is Equal to or Greater than Holding Period, that problem won't be there.
Therefore, (c) longer than the maturity of the bond
jeff jeffy answered 2 years agoRelated Solutions
Using the bond below, calculate your annual holding period yield (on a bond equivalent basis). Holding...
Using the bond below, calculate your annual holding period yield
(on a bond equivalent basis).
Holding period yield (HPY)
Last coupon date pre-purchase
7/15/2016
First coupon date post-purchase
1/15/2017
Purchase price (clean)
90.000
Purchase (settlement) date
10/1/2016
Sale price (clean)
92.000
Sale date
2/10/2022
Coupon rate
5.00%
Coupon
Semi-annual
Convention
30/360
3.096%
5.888%
6.192%
6.246%
6.288%
What is reinvestment rate risk? Which has morereinvestment rate risk: a 1-year bond or a...
What is reinvestment rate risk? Which has more
reinvestment rate risk: a 1-year bond or a 10-year
bond.please explain
Which of the following statements is FALSE? Over any given period, the risk of holding a...
Which of the following statements is FALSE?
Over any given period, the risk of holding a stock is that the
dividends plus the final stock price will be higher or lower than
expected, which makes the realized return risky.
Because investors are risk averse, they will demand a risk
premium to hold unsystematic risk.
Because investors can eliminate firm-specific risk "for free" by
diversifying their portfolios, they will not require a reward or
risk premium for holding it.
The risk...
The double bonds are stronger and shorter than single bonds. For example, a C−C single bond...
The double bonds are stronger and shorter than single bonds. For example, a C−C single bond has an average bond energy of 347 kJ/mole while a C=C double bond has an average bond energy of 611 kJ/mole. Use valence bond theory to explain why a double bond is not simply twice as strong as a single bond.
What is the holding period return (Capital gain) of a 9% annual coupon bond with a...
What is the holding period return (Capital gain) of a 9% annual
coupon bond with a face value of $1000 and with five years to
maturity if it is purchased at the beginning of year 1 at a
Yield-to-Maturity (market rate) of 6.0% and sold at the beginning
of year 2? Assume that rates do not change.
7.4%
7.1%
6.8%
6.0%
Calculate Holding period yield – A bond is purchased at $1,200 and pays a $120 annual...
Calculate Holding period yield – A bond is purchased at $1,200
and pays a $120 annual payment with
maturity in 7 years. The buyer has to sell the bond after 3 years
and rates are now 7%. What is the price
the bond sells at? What is the holding period yield?
Do not use Excel!
Explain the relation between risk and return Describe the two components of a total holding period...
Explain the relation between risk and return
Describe the two components of a total holding period return,
and calculate this return for an asset
Explain what an expected return is and calculate the expected
return for an asset
Explain what the standard deviation of returns is and why it is
very useful in finance, and calculate it for an asset
Explain the concept of diversification
Discuss which type of risk matters to investors and why
Describe what the Capital Asset...
An investor has two bonds in her portfolio, Bond C and Bond Z. Each bond matures...
An investor has two bonds in her portfolio, Bond C and Bond Z.
Each bond matures in 4 years, has a face value of $1,000, and has a
yield to maturity of 9.2%. Bond C pays a 10% annual coupon, while
Bond Z is a zero coupon bond.
a. Assuming that the yield to maturity of each bond remains at
9.2% over the next 4 years, calculate the price of the bonds at
each of the following years to maturity....
An investor has two bonds in her portfolio, Bond C and Bond Z. Each bond matures...
An investor has two bonds in her portfolio, Bond C and Bond Z.
Each bond matures in 4 years, has a face value of $1,000, and has a
yield to maturity of 9.3%. Bond C pays a 12% annual coupon, while
Bond Z is a zero coupon bond. Assuming that the yield to maturity
of each bond remains at 9.3% over the next 4 years, calculate the
price of the bonds at each of the following years to maturity.
Round...
An investor has two bonds in her portfolio, Bond C and Bond Z. Each bond matures...
An investor has two bonds in her portfolio, Bond C and Bond Z.
Each bond matures in 4 years, has a face value of $1,000, and has a
yield to maturity of 8.4%. Bond C pays a 10% annual coupon, while
Bond Z is a zero coupon bond. Assuming that the yield to maturity
of each bond remains at 8.4% over the next 4 years, calculate the
price of the bonds at each of the following years to maturity.
Round...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- 1. Write an if-else statement to describe an object. Print "Balloon" if isBalloon is true and...
- An investor is considering purchasing a Treasury bond with a 20 year maturity, an 8% coupon...
- Write a program that copies the contents of one file to a destination file. This program...
- how to conduct a marketing mix for 3d crest white strips
- Is big data analytics used for service innovation at Amazon? If so, please write a brief...
- A shrink-fit process has been used to enhance the pressure carrying capacity of a cylinder. During...
- Ten-year zero coupon bonds issued by the U.S. Treasury have a face value of $1,000 and...
ADVERTISEMENT