You buy an 6.9% coupon, paid annually, 11-year maturity bond for $965. A year later, the...

You buy an 6.9% coupon, paid annually, 11-year maturity bond for $965. A year later, the bond price is $1,075. Face value of the bond is $1,000.

1.What is the yield to maturity on the bond today? (Round your answer to 2 decimal places.)

2. What is the yield to maturity on the bond in one year? (Round your answer to 2 decimal places.)

3. What is your rate of return over the year? (Round your answer to 2 decimal places.)

Solutions

Expert Solution

Given

coupon rate=6.9%

years to maturity=11

face value=$1000

bond value=$1075

computation:

1)hence yield to maturity is 7.38%

working notes:

computation

2)yield to maturity is 5.79%

working notes

computation

3)Rate of return is 17.80%

working notes

jeff jeffy answered 1 year ago

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