Suppose you buy a 7.4 percent coupon bond today for $1,150. The bond has 11 year
ID: 2722491 • Letter: S
Question
Suppose you buy a 7.4 percent coupon bond today for $1,150. The bond has 11 years to maturity.
What rate of return do you expect to earn on your investment? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)
Two years from now, the YTM on your bond has increased by 2 percent, and you decide to sell. What price will your bond sell for? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)
Suppose you buy a 7.4 percent coupon bond today for $1,150. The bond has 11 years to maturity.
Explanation / Answer
a BOND YTM (ANNUAL) Maturity(Years) 11 Coupon rate 7.4% Coupon PMT 74 PAR Value 1000 YTM 6% PRESENT VALUE ($1,150.00) Rate of Return= 6% b BOND VALUE (ANNUAL) Maturity(Years) 11 Coupon rate 7% Coupon PMT 74 PAR Value 1000 YTM 8% PRESENT VALUE ($957.17) Bond Price= $957.17
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