Question
In: Finance
The YTM on a bond is the interest rate you earn on your investment if interest...
|
The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). |
| a. |
Suppose that today you buy an annual coupon bond with a coupon rate of 8.4 percent for $775. The bond has 7 years to maturity and a par value of $1,000. What rate of return do you expect to earn on your investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| b-1. | Two years from now, the YTM on your bond has declined by 1 percent, and you decide to sell. What price will your bond sell for? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| b-2. | What is the HPY on your investment? (Do not round intermediate calculations |
Solutions
Expert Solution
PRICE OFA BOND CAN BE CALCULATED BY PRESENT VALUE METHOD OR USING A SIMPLE FORMULa
Yield to maturity (YTM ) = 13.74% (approx)
AFTER 2 YEARS FROM NOW NEW Yield to maturity = 13.74% - 1% =12.74%
PRICE AFTER 2 YEARS = $846.33
jeff jeffy answered 2 years agoRelated Solutions
The YTM on a bond is the interest rate you earn on your investment if interest...
The YTM on a bond is the interest rate you earn on your
investment if interest rates don’t change. If you actually sell the
bond before it matures, your realized return is known as the
holding period yield (HPY).
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The YTM on a bond is the interest rate you earn on your investment if interest...
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The YTM on a bond is the interest rate you earn on your investment if interest...
The YTM on a bond is the interest rate you earn on your
investment if interest rates don’t change. If you actually sell the
bond before it matures, your realized return is known as the
holding period yield (HPY).
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The YTM on a bond is the interest rate you earn on your investment if interest...
The YTM on a bond is the interest rate you earn on your
investment if interest rates don’t change. If you actually sell the
bond before it matures, your realized return is known as the
holding period yield (HPY).
a. Suppose that today you buy a bond with an annual coupon rate
of 11 percent for $1,060.
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expect to earn on your investment? Assume a par value...
The YTM on a bond is the interest rate you earn on your investment if interest...
The YTM on a bond is the interest rate you earn on your
investment if interest rates don’t change. If you actually sell the
bond before it matures, your realized return is known as the
holding period yield (HPY).
a.
Suppose that today you buy a bond with an annual coupon of 10
percent for $1,120. The bond has 17 years to maturity. What rate of
return do you expect to earn on your investment? Assume a par value
of...
The YTM on a bond is the interest rate you earn on your investment if interest...
The YTM on a bond is the interest rate you earn on your
investment if interest rates don’t change. If you actually sell the
bond before it matures, your realized return is known as the
holding period yield (HPY).
a. Suppose that today you buy a bond with an annual coupon of 11
percent for $1,060. The bond has 20 years to maturity. What rate of
return do you expect to earn on your investment? Assume a par value
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The YTM on a bond is the interest rate you earn on your investment if interest...
The YTM on a bond is the interest rate you earn on your
investment if interest rates don’t change. If you actually sell the
bond before it matures, your realized return is known as the
holding period yield (HPY). a. Suppose that today you buy a bond
with an annual coupon of 11 percent for $1,060. The bond has 20
years to maturity. What rate of return do you expect to earn on
your investment? Assume a par value of...
The YTM on a bond is the interest rate you earn on your investment if interest...
The YTM on a bond is the interest rate you earn on your
investment if interest rates don’t change. If you actually sell the
bond before it matures, your realized return is known as the
holding period yield (HPY).
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of return do you expect to earn on your investment? Assume a par
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The YTM on a bond is the interest rate you earn on your investment if interest...
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investment if interest rates don’t change. If you actually sell the
bond before it matures, your realized return is known as the
holding period yield (HPY).
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