You purchase a two-year $1000 face value bond at par. The bond has a 6% coupon r
ID: 1169668 • Letter: Y
Question
You purchase a two-year $1000 face value bond at par. The bond has a 6% coupon rate.However, do to cashflow problems, the company misses the first coupon payment, but pays both coupons payments in year 2. What is your rate of return?
0.0583
0.0653
0.0300
0.0600
0.0428
Using the information, in the previous question, suppose the company pays all of the coupon payments on time. What is your rate of return?
0.1200
0.0600
0.0300
0.0500
0.0800
What is the price of a coupon bond that has annual coupon payments of $75, a par value of $1000, a yield to maturity of 5%, and a maturity of two years?
$1043.08
$1046.49
$1000.00
$1150.00
You purchase a two-year $1000 face value bond at par. The bond has a 6% coupon rate.However, do to cashflow problems, the company misses the first coupon payment, but pays both coupons payments in year 2. What is your rate of return?
0.0583
0.0653
0.0300
0.0600
0.0428
Someone offers you the following deal. They will pay you $5000 in two years if you agree to pay them $4500 today. If you accept the deal, what is your rate of return?
0.0731
0.0541
0.1111
0.0342
0.0583
0.0653
0.0300
0.0600
0.0428
Explanation / Answer
Given,
Bond face value = 1000
Coupon rate = 6%
No. of years = 2
if coupons paid for two years in 2nd year, then
= 0+(60+60)/1000
=12/2 = 6%
if the company pays it on every year,
= (0.06+0.06)/2 = 0.06
** 4500(1+r)^2 = 5000
therefore, 1+r = 1.05409
r = 0.5409
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