Question
In: Finance
Suppose you purchase a 30-year, zero-coupon bond with a yield to maturity of 4%. You hold...
Suppose you purchase a 30-year, zero-coupon bond with a yield to maturity of 4%. You hold the bond for five years before selling it.
a. If the bond's yield to maturity is 4 % when you sell it, what is the internal rate of return of your investment?
b. If the bond's yield to maturity is 5 % when you sell it, what is the internal rate of return of your investment?
c. If the bond's yield to maturity is 3 % when you sell it, what is the internal rate of return of your investment?
d. Even if a bond has no chance of default, is your investment risk free if you plan to sell it before it matures? Explain. Note: Assume annual compounding.
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Suppose you purchase a 30-year, zero-coupon bond with a yield to maturity of 6.3%. You hold...
Suppose you purchase a 30-year, zero-coupon bond with a yield to
maturity of 6.3%. You hold the bond for five years before selling
it.
a. If the bond's yield to maturity is 6.3% when you sell it,
what is the internal rate of return of your investment?
b.If the bond's yield to maturity is 7.3% when you sell it, what
is the internal rate of return of your investment?
c.If the bond's yield to maturity is 5.3% when you sell...
Suppose you purchase a 30-year, zero-coupon bond with a yield to maturity of 9%. You hold...
Suppose you purchase a 30-year, zero-coupon bond with a yield to
maturity of 9%. You hold the bond for five years before selling it.
A. If the bond's yield to maturity is 9% when you sell it, what is
the internal rate of return of your investment? (round to two
decimal places) B. If the bond's yield to maturity is 10% when you
sell it, what is the internal rate of return of your investment?
(round to two decimal places...
Suppose you purchase a 30-year, zero-coupon bond with a yield to maturity of 8%. You hold...
Suppose you purchase a 30-year, zero-coupon bond with a yield
to maturity of 8%. You hold the bond for five years before selling
it.
a. If the bond's yield to maturity is 8% when you sell it,
what is the internal rate of return of your investment?
b. If the bond's yield to maturity is 9% when you sell it,
what is the internal rate of return of your investment?
c. If the bond's yield to maturity is 7% when...
Suppose you purchase a 30-year, zero-coupon bond with a yield to maturity of 3 % ....
Suppose you purchase a 30-year, zero-coupon bond with a yield
to maturity of
3 %
.
You hold the bond for five years before selling it.
a. If the bond's yield to maturity is
3 %
when you sell it, what is the internal rate of return of your
investment?
b. If the bond's yield to maturity is
4 %
when you sell it, what is the internal rate of return of your
investment?
c. If the bond's yield to...
Suppose you purchase a 30-year, zero-coupon bond with a yield to maturity of 8 %. You...
Suppose you purchase a 30-year, zero-coupon bond with a yield
to maturity of 8 %. You hold the bond for five years before selling
it.
a. If the bond's yield to maturity is 8% when you sell it,
what is the internal rate of return of your investment?
b. If the bond's yield to maturity is 9 % when you sell it,
what is the internal rate of return of your investment?
c. If the bond's yield to maturity is...
Suppose you purchase a 30-year, SEK 10,000 par value, zero-coupon bond with a yield to maturity...
Suppose you purchase a 30-year, SEK 10,000 par value,
zero-coupon bond with a yield to maturity (YTM) of 4.2%. You hold
the bond for 5 years before selling it.
(a) What is the price of the bond when you buy it?
Answer: The price of the bond is SEK .
(round to full SEK)
(b) If the bond’s yield to maturity drops by 1% when you sell it,
what is the internal rate of return of your investment?
Answer: If...
(a) Suppose you purchase a 20-year, zero-coupon bond with a yield to maturity of 10%. For...
(a) Suppose you purchase a 20-year, zero-coupon bond with a
yield to maturity of 10%. For a face value of $800, the bond will
initially trade for
(b) If the bond’s yield to maturity change to be 12%, what will
its price be five years later?
(c) If you purchased the bond at $118.91 and sold it 5 years
later, what would the rate of return of your investment be?
A zero-coupon bond with 4 years to maturity and the yield to maturity of 8%. When...
A zero-coupon
bond
with 4 years to
maturity and the yield to maturity of 8%. When the yield
increases,
the duration
of this bond
decreases.
a. True b.
False
2) A bond issuer often
repurchases Callable
bonds for
a discount
bond.
a. True b.
False
Credit
Default Swap (CDS) is an insurance policy on default
risk of corporate bond or loan.
a. True b.
False
4) The delivery of the
underlying asset is seldom made in forward
contracts while the...
A zero-coupon bond has a par value of $1,000 and a yield-to-maturity of 5%. You purchase...
A zero-coupon bond has a par value of $1,000 and a
yield-to-maturity of 5%. You purchase the bond when it has exactly
17 years remaining until maturity. You hold the bond for 6 months
and then sell it. If the bond's yield-to-maturity is 9% when you
sell it, what is your percentage return over this 6-month holding
period? When computing bond prices, use a semi-annual compounding
period. Enter your answer as a decimal and show 4 decimal places.
For example,...
A 12.25-year maturity zero-coupon bond selling at a yield to maturity of 8% (effective annual yield)...
A 12.25-year maturity zero-coupon bond selling at a yield to
maturity of 8% (effective annual yield) has convexity of 139.2 and
modified duration of 11.34 years. A 40-year maturity 6% coupon bond
making annual coupon payments also selling at a yield to maturity
of 8% has nearly identical modified duration—-12.30 years—but
considerably higher convexity of 272.9.
a. Suppose the yield to maturity on both bonds increases to 9%.
What will be the actual percentage capital loss on each bond? What...
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