Derive the probability distribution of the 1-year HPR on a 30-year U.S. Treasury bond with a 3.0% coupon if it is currently selling at par and the probability distribution of its yield to maturity a year from now is as shown in the table below. (Assume the entire 3.0% coupon is paid at the end of the year rather than every 6 months. Assume a par value of $100.) Note: Leave no cells blank - be certain to enter "0" wherever required. Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places. Economy Boom Normal Growth Recession Probability 0.35 0.40 0.25 YTM 12.0% 10.0 % 9.0 % Price Capital Gain $ Coupon Interest 3.00 3.00 3.00 HPR % % %

Essentials Of Investments
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Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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Derive the probability distribution of the 1-year HPR on a 30-year U.S. Treasury bond with a 3.0% coupon if it is currently selling at
par and the probability distribution of its yield to maturity a year from now is as shown in the table below. (Assume the entire 3.0%
coupon is paid at the end of the year rather than every 6 months. Assume a par value of $100.)
Note: Leave no cells blank - be certain to enter "0" wherever required. Negative values should be indicated by a minus sign.
Do not round intermediate calculations. Round your answers to 2 decimal places.
Economy
Boom
Normal Growth
Recession
Probability
0.35
0.40
0.25
YTM
12.0 %
10.0 %
9.0 %
Price
Capital Gain
$
Coupon
Interest
3.00
3.00
3.00
HPR
%
%
%
Transcribed Image Text:Derive the probability distribution of the 1-year HPR on a 30-year U.S. Treasury bond with a 3.0% coupon if it is currently selling at par and the probability distribution of its yield to maturity a year from now is as shown in the table below. (Assume the entire 3.0% coupon is paid at the end of the year rather than every 6 months. Assume a par value of $100.) Note: Leave no cells blank - be certain to enter "0" wherever required. Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places. Economy Boom Normal Growth Recession Probability 0.35 0.40 0.25 YTM 12.0 % 10.0 % 9.0 % Price Capital Gain $ Coupon Interest 3.00 3.00 3.00 HPR % % %
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