Suppose that an investor with a 3-year investment horizon is considering buying an 8-year 6% coupon...

Suppose that an investor with a 3-year investment horizon is considering buying an 8-year 6% coupon bond selling at par (semi-annual coupon payments). The investor expects that she can reinvest the coupin payments at an annual interest rate of 7% and that at the end of the investment horizon all bonds will be selling to offer a YTM of 9%. How much is the coupons & interest earned on reinvesting these coupon by the end of 3-yr? Round your answer to 2 decimal places.

Solutions

Expert Solution

Coupons & interest earned on reinvesting these coupon by the end of 3-yr = $196.50

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Suppose that an investor with a 3-year investment horizon is considering buying an 8-year 6% coupon...

Suppose that an investor with a 3-year investment horizon is considering buying an 8-year 6% coupon bond selling at par (semi-annual coupon payments). The investor expects that she can reinvest the coupon payments at an annual interest rate of 7% and that at the end of the investment horizon all bonds will be selling to offer a YTM of 9%. How much is the coupons & interest earned on reinvesting these coupon by the end of 3-yr? What is the...

Suppose that an investor with a 3-year investment horizon is considering buying an 8-year 6% coupon...

Suppose that an investor with a 3-year investment horizon is considering buying an 8-year 6% coupon bond selling at par (semi-annual coupon payments). The investor expects that she can reinvest the coupin payments at an annual interest rate of 7% and that at the end of the investment horizon all bonds will be selling to offer a YTM of 9%. How much is the coupons & interest earned on reinvesting these coupon by the end of 3-yr? What is the...

Suppose that an investor has 8-year investment horizon. The investor is considering a 15-year semi-annual coupon...

Suppose that an investor has 8-year investment horizon. The investor is considering a 15-year semi-annual coupon bond selling at $990 (par value is $1000) and having a coupon rate of 4%. The investor expectations are as follows: • The first 4 semi-annual coupon payments can be reinvested from the time of receipt to the end of the investment horizon at an annual interest rate of 4%, • the first 8 semi-annual coupon payments can be reinvested from the time of...

Suppose that an investor with a five-year investment horizon is considering purchasing a seven-year 9% coupon...

Suppose that an investor with a five-year investment horizon is considering purchasing a seven-year 9% coupon bond selling at par (semi-annual coupon payments). The investor expects that he can reinvest the coupon payments at an annual interest rate of 9.4% and that at the end of the investment horizon two-year bonds will be selling to offer a yield to maturity of 11.2%. What is the total of coupon and coupon reinvestment? (Round your answer to 2 decimal points) What is the...

Suppose that an investor with a five-year investment horizon is considering purchasing a seven-year 7% coupon...

Suppose that an investor with a five-year investment horizon is considering purchasing a seven-year 7% coupon bond selling at par. The investor expects that he can reinvest the coupon payments at an annual interest rate of 9.4% and that at the end of the investment horizon two-year bonds will be selling to offer a yield to maturity of 11.2%. What is the total return on this investment? Extra information: Draw the cashflows of the 7 year bond. Using Par Value...

Suppose that an investor with a 5 year investment horizon is considering purchasing a 7 year,...

Suppose that an investor with a 5 year investment horizon is considering purchasing a 7 year, 9% coupon bond selling at par. The investor expects that he can reinvest the coupon at an annual interest rate of 9.4% and that at the end of the investment horizon 5 year bond will be selling to offer a yield to maturity of 11.2%. What is the total return for this bond?

Assume an investor with a 5 year investment horizon is considering purchasing an 8 year semiannual...

Assume an investor with a 5 year investment horizon is considering purchasing an 8 year semiannual 5% coupon bond that is currently selling at 99. The investor expects to reinvest the coupons at 2% and that the bond will be selling to offer a yield to maturity of 6% in five years. What is the expected total return for this bond? Express your answer on a bond-equivalent basis and on an effective annual rate basis.

Suppose an investor with a 7-year investment horizon is considering the purchase of a 4.50% APR,...

Suppose an investor with a 7-year investment horizon is considering the purchase of a 4.50% APR, monthly payment, mortgage with 22 years (264 months) remaining until maturity. The mortgage currently has an outstanding balance of $245,000 and is selling to offer a YTM of 4.8% on the secondary market. The investor expects to be able to reinvest the first 36 monthly cashflows at 4.8% (over their entire reinvestment interval), but expects to be able to reinvest the last 48 monthly...

Suppose an investor with a 7-year investment horizon is considering the purchase of a 4.50% APR,...

. Suppose that an investor with a five-year investment horizon is considering purchasing a seven-year 9%...

. Suppose that an investor with a five-year investment horizon is considering purchasing a seven-year 9% coupon bond selling at par. The investor expects that he can reinvest the coupon payments at an annual interest rate of 9.4% and that at the end of the investment horizon two-year bonds will be selling to offer a yield to maturity of 11.2%. What is the five-year total return for this bond?

Subjects