A bond has 10 years until maturity, a coupon rate of 8.1%, and sells for $1,190. Interest is paid annually. (Assume a face value of $1,000.) a. If the bond has a yield to maturity of 9.9% 1 year from now, what will its price be at that time? Note: Do not round intermediate calculations. Round your answer to nearest whole number. Price b. What will be the rate of return on the bond? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign. Rate of return % c. If the inflation rate during the year is 3%, what is the real rate of return on the bond? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign. Real rate of return %
A bond has 10 years until maturity, a coupon rate of 8.1%, and sells for $1,190. Interest is paid annually. (Assume a face value of $1,000.) a. If the bond has a yield to maturity of 9.9% 1 year from now, what will its price be at that time? Note: Do not round intermediate calculations. Round your answer to nearest whole number. Price b. What will be the rate of return on the bond? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign. Rate of return % c. If the inflation rate during the year is 3%, what is the real rate of return on the bond? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign. Real rate of return %
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 8MC: Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for...
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