@ lake ^ . Tiaa Andr on . m* Chome MGMT 273 Fa Quiz: Chapter 6 Quiz This Questio

Question

@ lake ^ . Tiaa Andr on . m* Chome MGMT 273 Fa Quiz: Chapter 6 Quiz This Question: 1 pt This Quiz: 12 pls possidle Suppose you purchase a 10-year bond with 6 8% anual coupons You hold ee bond ice lex" years, un imedately ahr receitg ts lurt, coupon ite a. What cash flows will you pay and recelive from your investrsent in the bond per $100 face value? b. What is the annual rate of returm of your investment? O A. Year Cash Flows -S11142 80 $6 80 56 30$114 34 B. Year Cash Flows $107.54p $6 80 $6 80 $114 34 O C. Year Cash Flows $11142 6 80 56 80 56.80 $114 34 OD. Year S680 56 80 $6 80 5107 54 Cash Flows $114.34 b. What is the annual rate of returm of your investment? s Round to one decimal place) Click to select your answens)

Explanation / Answer

Maturity 10 Years Coupon 6.80% YTM 5.30% Face value 100 Price 111.42 Using price function of Excel with settlement and maturity 10 years apart, and coupon and YTM as mentioned above So the cash flow will be Year 0 1 2 3 Cash flow -111.42 6.80 6.80 6.80 Price 107.54 Price at year 4 the only difference will be settlement and maturity will be 6 years apart IRR 5.30% Using IRR function and above cash flows

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