Question
In: Finance
Suppose you purchase a 20 year treasury bond with a? 6% annual coupon ten years ago...
Suppose you purchase a 20 year treasury bond with a? 6% annual coupon ten years ago at par. Today the? bond's yield to maturity has risen to? 8% (EAR). If you sell this bond? now, the internal rate of return you will earn on your investment will be closest? to:
A.) 5.0
B.) 6.0
C.) 4.9
D.) 8.0
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Suppose you purchase a ten-year bond with 6% annual coupons. You hold the bond for four years...
Suppose you purchase a ten-year bond with 6% annual
coupons. You hold the bond for four years and sell it
immediately after receiving the fourth coupon. If the
bond's yield to maturity was 5% when you purchased and sold the
bond.
a. What cash flows will you pay and receive from your
investment in the bond per $100 face value?
We need to calculate how much we are willing to pay for the bonds
by using the formula
Suppose you purchase a ten-year bond with 6 percent annual coupons. You hold the bond for...
Suppose you purchase a ten-year bond with 6 percent annual
coupons. You
hold the bond for four years, and sell it immediately after
receiving the fourth
coupon. If the bond's yield to maturity was 4.5% when you purchased
and 7%
when you sold the bond. What is your annual rate of return on the
bond in
each of the following situations:
a) All coupons were immediately spent when received.
b) All coupons were reinvested in a bank account, which pays...
You purchased an annual interest coupon bond one year ago with 6 years remaining to maturity at the time of purchase.
You purchased an annual interest coupon bond one year ago with 6 years remaining to maturity at the time of purchase. The coupon interest rate is 10% and par value is $1,000. At the time you purchased the bond, the yield to maturity was 8%. If you sold the bond after receiving the first interest payment and the bond's yield to maturity had changed to 7%, your annual total rate of return on holding the bond for that year would...
Suppose you purchase a 30-year Treasury bond with a 7% annual coupon, initially trading at par....
Suppose you purchase a 30-year Treasury bond with a 7% annual
coupon, initially trading at par. In 10 years' time, the bond's
yield to maturity has risen to 8% (EAR). (Assume $100 face value
bond.)
a. If you sell the bond now, what internal rate of return will
you have earned on your investment in the bond?
b. If instead you hold the bond to maturity, what internal rate
of return will you earn on your initial investment in the...
You purchase a 20-year, $1,000 par value 6% coupon bond with annual payments with a yield...
You purchase a 20-year, $1,000 par value 6% coupon bond with
annual payments with a yield to maturity of 8%. 1 year later after
receiving a coupon payment, the yield to maturity has decreased to
7% and you sell the bond. What is your total rate of return on the
investment over the year?
Suppose that you invest in a two-year Treasury bond with a coupon rate of 6% and...
Suppose that you invest in a two-year Treasury bond with a
coupon rate of 6% and $1,000 par. Suppose that you buy this bond at
a price of exactly $1,000. You intend to hold this bond to maturity
and reinvest the coupons until the bond matures. You expect to
reinvest the coupons in an account that pays an APR of 1.23%, with
semi-annual compounding. What is the effective annual rate of
return on your investment? Hint: see Example 8 in...
Suppose you purchase a ten-year bond with 9 % annual coupons.You hold the bond for four...
Suppose you purchase a ten-year bond with 9 % annual
coupons.You hold the bond for four years and sell it immediately
after receiving the fourth coupon. If the bond's yield to maturity
was 8.05 % when you purchased and sold the bond, a. What cash
flows will you pay and receive from your investment in the bond per
$ 100 face value? b. What is the internal rate of return of your
investment? Note: Assume annual compounding.
Assume that you are considering the purchase of a 20-year, bond with an annual coupon rate...
Assume that you are considering the purchase of a 20-year, bond
with an annual coupon rate of 10%. The bond has a par value of
$1,000, and it makes annual interest payments. If you require an 8%
yield to maturity on this investment, what is the maximum price you
should be willing to pay for the bond? Explain why the price is
different from the par value.
Assume that you are considering the purchase of a 20-year, bond with an annual coupon rate...
Assume that you are considering the purchase of a 20-year, bond
with an annual coupon rate of 9.5%. The bond has a face value of
$1,000, and it makes semiannual interest payments. If you require
an 9.7% nominal yield to maturity on this investment, what is the
maximum price you should be willing to pay for the bond? (With
excel formulas)
For a ten-year 20% coupon bond with a face value of $10,000, the annual coupon payment...
For a ten-year 20% coupon bond with a face value of $10,000,
the annual coupon payment is
$100
$200
$1,000
$2,000
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