Seven years ago you bought a $600,000, 15-year, deep discount bond with a market interest rate...

Seven years ago you bought a $600,000, 15-year, deep discount bond with a market interest rate of 5.15%. Since then market rates have gone to 5.9% and you find that you must sell the bond.

a. What was the initial price of the bond?

b. What is the current price of the bond?

c. Calculate the current annual rate of return on this instrument and compare it to the annual rate of return you were expecting.

d. Explain whether your return would have been relatively greater or less if you held originally purchased a 25-year instrument. Support your conclusion with the appropriate work

Expert Solution

Please ask your query if any in comment.

PLEASE RATE THUMBS UP ??

THANKYOU

Please don't dislike the answer, feel free to ask your query if any in comment.

Rahul Sunny answered 2 years ago

A zero- coupon bond matures in 15 years. At a market discount rate of 4.5% per...

A zero- coupon bond matures in 15 years. At a market discount rate of 4.5% per year and assuming annual compounding, the price of the bond per 100 of par value is closest to Group of answer choices 71.62 51.30 51.67 69.05

Susan bought a 15-year bond when it was issued by Octodan Corporation 3 years ago (NOTE:...

Susan bought a 15-year bond when it was issued by Octodan Corporation 3 years ago (NOTE: the bond was issued 3 years ago. In calculating price today, remember it has only 12 years remaining to maturity). The bond has a $1,000 face value, an annual coupon rate equal to 8 percent and the coupon is paid every six months. If the yield on similar-risk investments is 10 percent, a. What is the current market value (price) of the bond? b....

Three years ago you purchased a 15-year $1,000 bond with a coupon rate of 6 percent....

Three years ago you purchased a 15-year $1,000 bond with a coupon rate of 6 percent. You now wish to sell the bond and read that yields are 10 percent. What price should you receive for the bond? a $727.45 b $1,037.20 c $912.55 d $1,135.35

You bought a house 8 years ago with a $250,000 mortgage. It was a 15 year loan with

You bought a house 8 years ago with a $250,000 mortgage. It was a 15 year loan with monthly payments which will pay off the loan when you make the last payment. The interest rate was 6%. What are your monthly payment and your current loan balance? How much interest will you pay in the upcoming year?

Six years ago you took out a $220,000, 15-year mortgage with an annual interest rate of...

Six years ago you took out a $220,000, 15-year mortgage with an annual interest rate of 6% compounded monthly. i. Estimate your monthly payments on the mortgage. ii. Compute the outstanding balance on your current loan if you have just made the 72th payments?

One year ago, you bought the ABC bond with a maturity of 30 years for $980....

One year ago, you bought the ABC bond with a maturity of 30 years for $980. The bond’s capital gains yield is -0.3% as of today. The bond’s coupon rate is 7.0% with semiannual payment of coupon. What is the YTM for the bond as of today?

Suppose, three years ago, you purchased a 15-year coupon bond paying 5% interest annually with a...

Suppose, three years ago, you purchased a 15-year coupon bond paying 5% interest annually with a face value of $1000. It is now three years later and you just received an interest payment yesterday (the bond matures in exactly twelve years). You look in the paper and the yield on comparable debt is 6%. If you bought it at Par value, did you have a capital gain or loss? Also, if the yield decreased to 4.5%, would you have a...

Suppose you bought a bond with an annual coupon rate of 10% percent one year ago...

Suppose you bought a bond with an annual coupon rate of 10% percent one year ago for $1,500. The bond sells for $1,650 today. Assuming a $1,000 face value: a) What was your total dollar return on this investment over the past year? b) What was your total nominal rate of return on this investment over the past year? c) If the inflation rate last year was 5 %, what was your total real rate of return on this investment?...

You bought a bond five years ago for $935 per bond. The bond is now selling...

You bought a bond five years ago for $935 per bond. The bond is now selling for $980. It also paid $75 in interest per year, which you reinvested in the bond. Calculate the realized rate of return earned on this bond. (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) Realized rate of return = ? %

Suppose the discount rate is 8%. You bought a 12% coupon bond with 5 years left until maturity.

Suppose the discount rate is 8%. You bought a 12% coupon bond with 5 years left until maturity. After holding it for 3 years, the discount rate changed to 5% and sold the bond right after the discount rate change. What is your HPR?

Question