1. An investor buys a 20-year semiannual bond with a coupon rate of 5% for $950....

1. An investor buys a 20-year semiannual bond with a coupon rate of 5% for $950. He plans to hold the bond for 8 years and then sell it. The investor expects to reinvest the first 6 coupon payments at 4.5% and the next 10 payments at 5.5%. He also expects that the bond’s YTM at the end of the holding period to be 6%. Under these assumptions, the total interest amount is

A. $420.63 B. $450.85 C. $474.51 D. $491.47 E. $512.36

2. An investor buys a 20-year semiannual bond with a coupon rate of 5% for $950. He plans to hold the bond for 8 years and then sell it. The investor expects to reinvest the first 6 coupon payments at 4.5% and the next 10 payments at 5.5%. He also expects that the bond’s YTM at the end of the holding period to be 6%. Under these assumptions, the bond's price at the end of the holding period is

A. $898.35. B. $907.73 C. $915.32 D. $937.20 E. $957.35

3. An investor buys a bond for $975 with the intention to hold it for 6 years and then sell. He estimates the amount of the total future dollars for this investment as $1,508. This amount implies an annualized total return of

A. 7.4% B. 7.7% C. 8.2% D. 8.5% E. 8.8%

Expert Solution

jeff jeffy answered 1 year ago

An investor buys a 5-year bond with a coupon rate of 6.5% at a price that...

An investor buys a 5-year bond with a coupon rate of 6.5% at a price that reflects a yield to maturity of 10.9%. Interest is paid semiannually. Exactly one year later, after receiving the second coupon payment, the investor sells the bond for 97% of par value. What was the investor’s rate of return on the bond investment for the year? Enter your answer as a decimal out to four decimal places. As an example, you would enter 1.146% as...

An investor buys a bond with a $100 par value and a 5% coupon rate for...

An investor buys a bond with a $100 par value and a 5% coupon rate for $97. The bond pays interest semiannually. Exactly one year later, just after receiving the second coupon payment, the investor sells the bond for $96. What was the investor’s rate of return over the year from owning the bond? How do you get the answer using a financial calculator?

An investor buys a 5% annual coupon, 5 year bond for $1100. If the YTM is expected...

An investor buys a 5% annual coupon, 5 year bond for $1100. If the YTM is expected to remain constant over the next year, what return should the investor earn from the change in price of the bond? Group of answer choices

an investor buys a bond having a face value of $1,000 and a coupon rate of...

an investor buys a bond having a face value of $1,000 and a coupon rate of 6% payable semiannually. the market rate is now 3% and the bond natures in 15 Years. How much did the investor pay?

An investor considers the purchase of a 2-year bond with a 5% coupon rate, with interest...

An investor considers the purchase of a 2-year bond with a 5% coupon rate, with interest paid annually and par of 100. The spot rates observed in the market today are as follows: 1-yr spot is 3%, the 2-yr spot is 4% and the 3-yr spot is 5%. The clean price of the bond is closest to: a. 101.93. b. 102.85. c. 105.81. d. 102.36. e. 103.10.

An investor just purchased a 5-year $1,000 par value bond. The coupon rate on this bond...

An investor just purchased a 5-year $1,000 par value bond. The coupon rate on this bond is 10% annually, with interest paid every year. If the investor expects to earn 12% simple rate of return, how much the investor should pay for it?

You buy a 5 year, semiannual bond with a coupon rate of 10% for $820. After...

You buy a 5 year, semiannual bond with a coupon rate of 10% for $820. After 18 months, you sell the bond for $800. What was you rate of return over the 18 months? Correct anser is 15.85% please write down of how you get this number. Thank you.

find the coupon rate of a bond that is sold at 950 $ and has a...

find the coupon rate of a bond that is sold at 950 $ and has a par value with $1,000 , 5 years to maturity, and a discount rate of 6%? Select one: a. 5.3%. b. 3.2%. c. 4.7%. d. 6.2%. If the yield of maturity of the bond is higher than the coupon rate, the price of this bond will be? Select one: a. Higher than the par value. b. Equal the par value. c. Lower than the par...

Jiminy’s Cricket Farm issued a 20-year, 5 percent semiannual coupon bond 2 years ago. The bond...

Jiminy’s Cricket Farm issued a 20-year, 5 percent semiannual coupon bond 2 years ago. The bond currently sells for 96 percent of its face value. The company’s tax rate is 21 percent. The book value of the debt issue is $55 million. In addition, the company has a second debt issue, a zero coupon bond with 8 years left to maturity; the book value of this issue is $30 million, and the bonds sell for 67 percent of par. What...

Suppose the YTM is 5% for a 20-year $1000 bond with a 7% coupon rate and...

Suppose the YTM is 5% for a 20-year $1000 bond with a 7% coupon rate and annual coupon payments. Its bond price is $____. Instruction: Type ONLY your numerical answer in the unit of dollars, NO $ sign, NO comma, and round to one decimal place. E.g., if your answer is $7,001.56, should type ONLY the number 7001.6, NEITHER 7,001.6, $7001.6, $7,001.6, NOR 7002. Otherwise, Blackboard will treat it as a wrong answer.

Question