As a bond fund manager, you are considering 10-year corporate bonds issued by Mellon Bank (MB). Each MB bond has a $1,000 par value with 8% annual coupon rate. The coupons are paid semi-annually. The estimated rate of return on MB bond is 10%. What is the price of the bond? • A. $831.31 • B. $1,010.29 • C. $875.38 • D. $946.32 You purchase a 5-year corporate bond. The coupon rate of the bond is 6%, paid annually, and its par value is $1,000. The YTM is 4%. If you sell the bond one year later, what is your holding period return? • A. 3.5%
As a bond fund manager, you are considering 10-year corporate bonds issued by Mellon Bank (MB). Each MB bond has a $1,000 par value with 8% annual coupon rate. The coupons are paid semi-annually. The estimated rate of return on MB bond is 10%. What is the price of the bond? • A. $831.31 • B. $1,010.29 • C. $875.38 • D. $946.32 You purchase a 5-year corporate bond. The coupon rate of the bond is 6%, paid annually, and its par value is $1,000. The YTM is 4%. If you sell the bond one year later, what is your holding period return? • A. 3.5%
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 9P
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As a bond fund manager, you are considering 10-year corporate bonds issued by Mellon Bank (MB). Each MB bond has a $1,000 par value with 8% annual coupon rate. The coupons are paid semi-annually. The estimated rate of return on MB bond is 10%. What is the price of the bond?
• A. $831.31
• B. $1,010.29
• C. $875.38
• D. $946.32
You purchase a 5-year corporate bond. The coupon rate of the bond is 6%, paid annually, and its par value is $1,000. The YTM is 4%. If you sell the bond one year later, what is your holding period return?
• A. 3.5%
• B. 0.5%
• C. 1.7%
• D. 4.0%
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