An 4.8% coupon $1,000 par bond pays an annual coupon and will mature in 3 years.
ID: 2643787 • Letter: A
Question
An 4.8% coupon $1,000 par bond pays an annual coupon and will mature in 3 years. What should the yield to maturity on the bond be? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "%" sign in your response.)
If at the end of the first year the yield curve flattens out at 6.0%, what will be the 1-year holding-period return on the coupon bond? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "%" sign in your response.)
Below is a list of prices for zero-coupon bonds of various maturities.
Explanation / Answer
a. 4.8+(153.5/3)/ 846.5+1000/2
=55.96/ 923.25
=6.061%
b. the first year holding period return
= 6+18.46/ 981.4
= 2.329%
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