Problem 6-35 Holding Period Yield [LO 2]The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bondbefore it matures, your realized return is known as the holding period yield (HPY).a. Suppose that today you buy an annual coupon bond with a coupon rate of 8.3 percent for $890. The bond has 7 years tomaturity and a par value of $1,000. What rate of return do you expect to earn on your investment?Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.b-1. Two years from now, the YTM on your bond has declined by 1 percent, and you decide to sell. What price will your bond sellfor?Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.b-2. What is the HPY on your investment?Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.a. Rate of returnb-1. Price%b-2. Holding period return%

Your initial investment in a bond is used to determine your projected rate of return, which is…

Answered: Problem 6-35 Holding Period Yield [LO…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Problem 7-30 Holding Period Yield (LO2) The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). (Round the final answers to 2 decimal places.) a. Suppose that today you buy an 9.8% annual coupon bond for $1,240. The bond has 19 years to maturity. What rate of return do you expect to earn on your investment? Expected rate of return % b-1. Two years from now, the YTM on your bond has declined by 1%, and you decide to sell. What price will your bond sell for? (Omit $ sign in your response.) Bond price b-2. What is the HPY on your investment? HPY %
QUESTION 7 Consider the market for a bond which has a face value of $2,000, pays a coupon of $100, and matures in 1 year (that is, you will get the face value and one coupon payment next year). Suppose the demand for such bonds is given by P=4,000-2Q, and that the supply of such bonds is given by P=1,000+Q. What is the yield to maturity if one were to purchase the bond at the equilibrium price? 5% .05% 10% .10%
5 The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy an annual coupon bond with a coupon rate of 8.2 percent for $845. The bond has 10 years to maturity and a par value of $1,000. What rate of return do you expect to earn on your investment? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b-1. Two years from now, the YTM on your bond has declined by 1 percent, and you decide to sell. What price will your bond sell for? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b-2. What is the HPY on your investment? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. eBook a. Rate of return b-1. Price b-2. Holding…
10-2 The rate of return that you would earn if you bought a bond and held it to its maturity date is called the bond's yield to maturity, or YTM. If interest rates in the economy rise after a bond has been issued, what will happen to the bond's price and to its YTM? Does the length of time to maturity affect the extent to which a given change in interest rates will affect the bond's price?
Problem 6-19 Interest Rate Risk (LO3) Consider three bonds with 5.00% coupon rates, all making annual coupon payments and all selling at face value. The short-term bond has a maturity of 4 years, the intermediate-term bond has a maturity of 8 years, and the long-term bond has a maturity of 30 years. ts a. What will be the price of the 4-year bond if its yield increases to 6.00%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What will be the price of the 8-year bond if its yield increases to 6.00%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. What will be the price of the 30-year bond if its yield increases to 6.00%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) d. What will be the price of the 4-year bond if its yield decreases to 4.00%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) e. What will be the price of the 8-year bond if its yield…
Problem 6-19 Interest Rate Risk (LO3) Consider three bonds with 5.10% coupon rates, all making annual coupon payments and all selling at face value. The short- term bond has a maturity of 4 years, the intermediate-term bond has a maturity of 8 years, and the long-term bond has a maturity of 30 years. a. What will be the price of the 4-year bond if its yield increases to 6.10%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What will be the price of the 8-year bond if its yield increases to 6.10%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. What will be the price of the 30-year bond if its yield increases to 6.10%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) d. What will be the price of the 4-year bond if its yield decreases to 4.10%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) e. What will be the price of the 8-year bond if its yield…
Question 6 Hand written plzz izt Imagine that in a given point in time, t, we observe the following yields: i1t = 2%, i2t = 4%, and 6% on US Treasury Bonds. What is the expected short term interest rate at time t+2 if we assume that Expectations Theory holds? - O 6% 10% 5% None of the above
10-2 The rate of return that you would earn if you bought a bond and held it to its maturity date is called the bond’s yield to maturity, or YTM. If interest rates in the economy rise after a bond has been issued, what will happen to the bond’s price and to its YTM? Does the length of time to maturity affect the extent to which a given change in interest rates will affect the bond’s price? 10-3 A bond that pays interest forever and has no maturity date is a perpetual bond. How is the yield to maturity on such a bond determined?
-7 The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy a bond with an annual coupon of 12 percent for $1,140. The bond has 19 years to maturity. What rate of return do you expect to earn on your investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b- Two years from now, the YTM on your bond has declined by 1 percent and you 1. decide to sell. What price will your bond sell for? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b- What is the HPY on your investment? (Do not round intermediate calculations and 2. enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Expected rate of retum. b-1. Bond price b-2. HPY %
HW#3 Consider a coupon bond that has a $1,000 par value and a coupon rate of 10%. The bond is currently selling for $1,150 and has 8 years to maturity. What is the bond’s yield to maturity? A 10-year, 7% coupon bond with a face value of $1,000 is currently selling for $871.65. Compute your rate of return if you sell the bond next year for $880.10. Consider the decision to purchase either a 5-year corporate bond or a 5-year municipal bond. The corporate bond is a 12% annual coupon bond with a par value of $1,000. It is currently yielding 5%. The municipal bond has an 8.5% annual coupon and a par value of $1,000. It is currently yielding 7%. Which of the two bonds would be more beneficial to you? Assume that your marginal tax rate is 35%. Calculate the duration of a $1,000 6% coupon bond with three years to maturity. Assume that all market interest rates are 7%. Consider the bond in the previous question. Calculate the expected price change if interest rates drop to 6.75% using the…
Problem 8 Coupon Bond. Coupon bond is a popular financial instrument. Here is the deal: A coupon bonds of face value F and maturity date N years from now with payment P per year will pay you P Baht per years for N years. Then at last payment you will also get F Baht. 10Million Baht For example, if you buy today a coupon bond of face value F with maturity date N = 3 years from now with payment of P = 10,000 Baht. You will get 10K one year from now, then two years from now, then three years after you bought it. Then, at the end of the third year, along with the last 10K payment, you will also get 10Million Baht. = The question is if the (yearly) interest rate is r how much should you pay for a coupon bonds of face value F with maturity date N years from now with payment of P baht per year?
Accounting could someone show me how to work these out? QUESTION S Consider a bond which has a face value of $2,000, a coupon of $50, and is known to have a yield to maturity of 8%. Suppose that the bond matures in five years. What is the present value of the bond? $199.63 O $1,526.77 O $1,560.BO O $373.85 QUESTION 6 Consider the market for a bond which has a face value of $2,000, pays a coupon of $100, and matures in 2 years. Suppose the demand for such bonds is given by P=2,900-Q, and that the supply of such bonds is given by P200-20 What the equilibrium price and quantity of bonds sold? OP-$900, Q=2,000 OP-$2.000, Q'-900 OP=$200, Q*=9,000 OP=$9,000, Q* 200

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