Suppose you buy a 6.6 percent coupon bond today for $1,110. The bond has 7 years
ID: 2760179 • Letter: S
Question
Suppose you buy a 6.6 percent coupon bond today for $1,110. The bond has 7 years to maturity.
What rate of return do you expect to earn on your investment? (Round your answer to 2 decimal places. Omit the "%" sign in your response.)
Two years from now, the YTM on your bond has increased by 2 percent, and you decide to sell. What price will your bond sell for? (Round your answer to 2 decimal places. Omit the "$" sign in your response.)
What is the annual realized yield on your investment? (Negative amounts should be indicated by a minus sign. Round your answer to 2 decimal places. Omit the "%" sign in your response.)
a.
What rate of return do you expect to earn on your investment? (Round your answer to 2 decimal places. Omit the "%" sign in your response.)
Explanation / Answer
a)
b-1)
b-2)
Realized return:
= [($995.11+$66*2-$1,100)/$1,100]^(1/2)
= 1.57%
Face value (FV) $ 1,000.00 Coupon rate 6.60% Number of compounding periods per year 1 Interest per period (PMT) $ 66.00 Bond price (PV) $ (1,110.00) Number of years to maturity 7 Number of compounding periods till maturity (NPER) 7 Bond Yield to maturity RATE(NPER,PMT,PV,FV) Bond Yield to maturity 4.72%Related Questions
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