(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?

Solutions

Expert Solution

Hence, rate of return is 4.21%

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

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, 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...

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, 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...

You have just purchased a 10-year zero-coupon bond with a yield to maturity of 10% and...

You have just purchased a 10-year zero-coupon bond with a yield to maturity of 10% and a par value of $1,000. What would the rate of return on your investment at the end of the year be if you sold the bond? Assume the yield to maturity on the bond is 11% at the time you sell. A) 10.00% B) 20.42% C) 13.85% D) 1.4% 2. Consider a 5-year bond with a 7% coupon and a yield to maturity of...

A newly issued 20-year maturity, zero-coupon bond is issued with a yield to maturity of 9.5%...

A newly issued 20-year maturity, zero-coupon bond is issued with a yield to maturity of 9.5% and face value $1,000. Find the imputed interest income in: (a) the first year; (b) the second year; and (c) the last year of the bond’s life. (Round your answers to 2 decimal places.)

You find a zero coupon bond with a par value of $10,000 and 20 years to maturity. The yield to maturity on this bond is...

You find a zero coupon bond with a par value of $10,000 and 20 years to maturity. The yield to maturity on this bond is 4.2 percent. Assume semiannual compounding periods. What is the price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Subjects