Question

In: Accounting

Two years ago, you bought a 10-year, 6% annual coupon payment bond when its yield-to-maturity was...

Two years ago, you bought a 10-year, 6% annual coupon payment bond when its yield-to-maturity was 8%. Right after you purchased this bond, the yield-to-maturity on this bond increased to 9% and stayed at the same level in the next two years. You reinvested the coupon payments at the market rate of 9%. You just sold the bond at 9% yield-to-maturity. What is your annualized holding period return? What is your capital gain/loss? Note: Remember that capital gains/losses are computed with respect to the price on the constant price-yield trajectory.

Solutions

Expert Solution

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

Two years ago, you bought a 10-year, 6% annual coupon payment bond when its yield-to-maturity was...
Two years ago, you bought a 10-year, 6% annual coupon payment bond when its yield-to-maturity was 8%. Right after you purchased this bond, the yield-to-maturity on this bond increased to 9% and stayed at the same level in the next two years. You reinvested the coupon payments at the market rate of 9%. You just sold the bond at 9% yield-to-maturity. 1) What is your annualized holding period return? 2) What is your capital gain/loss?
You buy a 6% annual coupon bond, with 10-years to maturity, when its yield to maturity...
You buy a 6% annual coupon bond, with 10-years to maturity, when its yield to maturity is 5%. One year later, the yield to maturity is 6%. What is your return over the year?
You bought an 8% annual coupon, 10 year maturity bond ($1,000 par value) when the discount...
You bought an 8% annual coupon, 10 year maturity bond ($1,000 par value) when the discount rate was 9%. A year later, the discount rate was 10%. What is your holding period rate of return over the year? Please also include financial calculator calculations.
            A 10-year bond has a 10 percent annual coupon and a yield to maturity of...
            A 10-year bond has a 10 percent annual coupon and a yield to maturity of 12 percent. The bond can be called in 5 years at a call price of $1,050 and the bond’s face value is $1,000. Which of the following statements is most correct? Please explain why.             a.   The bond’s current yield is greater than 10 percent.             b.   The bond’s yield to call is less than 12 percent.             c.   The bond is selling at...
The yield to maturity of a 10-year 4% annual coupon bond is 4%. a.Suppose that you...
The yield to maturity of a 10-year 4% annual coupon bond is 4%. a.Suppose that you buy the bond today and hold it for 10 years.Assume that the interest rates go up to 5% (100 basis points increase) after the bond is purchased and before the first coupon is received. What is your realized rate of return? b.Suppose that you buy the bond today and hold it for 6years.Assume that the interest rates go up to 5% (100 basis points...
The yield to maturity of a 10-year 4% annual coupon bond is 4%. a.Suppose that you...
The yield to maturity of a 10-year 4% annual coupon bond is 4%. a.Suppose that you buy the bond today and hold it for 10 years.Assume that the interest rates go up to 5% (100 basis points increase) after the bond is purchased and before the first coupon is received. What is yourrealized rate of return? b.Suppose that you buy the bond today and hold it for 6years.Assume that the interest rates go up to 5% (100 basis points increase)...
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?...
Three years ago, you bought an 8% coupon bond with a 9-year remaining maturity for $936....
Three years ago, you bought an 8% coupon bond with a 9-year remaining maturity for $936. Today you sold the bond for $1,069. Given that the bond paid coupons semiannually, what was your effective annual rate of return on this investment?
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...
You own a 10-year bond paying an annual coupon rate of 5%. The yield to maturity...
You own a 10-year bond paying an annual coupon rate of 5%. The yield to maturity on the bond is 7%. The face value, as usual, is $1000. What is the value of the bond today?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT