Question

An investment was worth $38 two years ago, $52 one year ago, and is worth $46 today. The holding period return for the most recent year only (from 1 year ago to today) is _______%.  If your answer is negative, be sure to include a negative sign preceding your answer (ex. -.045678 or -4.5678% should be entered as: -4.57).

A(n) 3.3% bond with 6 years left to maturity has a YTM of 5.5%. The bond's price should be $__________. You should assume that the coupon payments occur semiannually.

A 5% coupon bond with 6 months remaining until maturity is currently trading at $1,006.8. Assume semi-annual coupon payments. The bond's YTM is__________%.

You will deposit $206 each of the next four years (the first deposit will occur one year from today, and there will be a total of 4 equal deposits) into an account that pays a 6.5% effective annual rate.  Five years from today, you wish to have exactly $1000 in the account. You would need to deposit an additional $_______ into the account five years from today to meet that goal.  

A 3.2% bond matures in 14 years. The bond pays coupons semiannually, and has a YTM of 3.2%. The price of the bond is $_________.

Answer 1

Answer(1):

Holding period return = (Ending value - Beginning value) / Beginning value

Holding period return = (46 - 52) / 52 * 100

Holding period return = -11.54

Answer(2):

Bond value = C * [1-(1+r)-n] / r + [F / (1+r)n ]

Where C = Coupon payment, r = rate of interest, n = number of periods to maturity, F = Face value.

Given- C: 1000*3.3%*1/2 = $16.5, r: 5.5% / 2 = 2.75%, n: 6*2 = 12 periods

Putting all the values in the formula, we get:

Bond value = [16.5 * [1-(1+.0275)-12] / .0275 ] + [1000 / (1+.0275)12]

Bond Value = $888.85

Answer(3): YTM = [C + (F-P) / n] / (F+P)/2

Where C = Coupon payment, F = Face value, P = Price of bond, n = number of periods

C: 1000*5%*1/2 = $25, F = $1000, P = $1006.8, n: 6 * 2 = 12 months (1 year)

Putting the values in the formula, we get:

YTM = [25 + (1000-1006.8) / 1] / (1000+1006.8) /2

YTM = 4.3% (Annual)

Answer(5):

Bond value = C * [1-(1+r)-n] / r + [F / (1+r)n ]

Where C = Coupon payment, r = rate of interest, n = number of periods to maturity, F = Face value.

Given- C: 1000*3.2%*1/2 = $16, r: 3.2% / 2 = 1.6, n: 14*2 = 28 periods.

Bond value = $1000