42. Suppose in 2019 you by two year $1,000 face-value 3% coupon bond for $900. In 2020, interest rates decrease to 2%. If you decide to sell your bond in 2020, what will be the selling price of your bond and one-year rate of return for you? A. $1020; 20% B. $918; 5.3% C. $930; -2.1% D. $1,009.8; 15.5%

42. Suppose in 2019 you by two year $1,000 face-value 3% coupon bond for $900. In 2020, interest rates decrease to 2%. If you decide to sell your bond in 2020, what will be the selling price of your bond and one-year rate of return for you? A. $1020; 20% B. $918; 5.3% C. $930; -2.1% D. $1,009.8; 15.5%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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You purchased a coupon-bearing bond at $800 and resold it at $900 after exactly one year. If the coupon is $60 paid annually, what is the current yield of the bond? O A. 0.075 O B. 0.125 O C. 0.067 O D. 0.200
7. Calculate the price of a $1,000 bond, offering a 6% coupon payment with 20 years left to maturity and a market interest rate of 7%. (Assume interest payments are semiannual.) Is this a discount or premium bond?Price: ___________Type ___________ 8.On March 24, 2020, the Dow Jones Industrial Average opened at $18,591.93 and closed at $20,704.91. What was the daily return that day, and what was the effective annual rate return (in percent) of the stock market that day?Daily Return: __________% EAR:_________ % 9. Financial analysts forecast GDY Inc.’s growth for the future to be 8%. GDY's recent annual dividend was $6.00. What is the value of GDY stock when the required return is 11%?Stock Value: $___________________
You just bought a bond (M=$1000, CR=10%, n=20 years, semiannual coupon pay yielding 10.5%. If you sell the bond one year from today when the yield is 9.75%, what would be your realized (actual) rate of return (before-tax)? 16.996%
4. You bought a 10-year, 5% coupon bond for $1,000 and sold it 1 year later for $1,100. What is the rate of return on your investment if the bond pays interest annually? If your marginal tax rate is 30%, and 50% of capital gains are taxable, what is the after-tax rate of return on your bond investment?
If you are issuing a bond that will make an annual (once per year) coupon payment of $30 for 20 years, will return a face value payment of $1000 in year 20, and the going interest rate is 2%, then the bond will fetch roughly $___________ in the market. 1160 1600 1000 1240
What must be the price of a $2,000 bond with a 5.8% coupon rate, annual coupons, and 30 years to maturity if YTM is 9.9% APR? O A. $976.40 O B. $1,708.70 OC. $1,464.60 D. $1,220.50
D4) Suppose that there is 30-year coupon bond with par value of $100 and Macaulay duration of 20.56. The coupon rate is unknown. Currently, the bond is traded at $90 and the yield is flat at 20% pa. Yield to maturity is an annualized simple interest rate compounded annually. If the bond yield increases by 50 basis points, what is the approximation of the percentage capital gain or loss? Please choose the correct range for the percentage capital gain/loss, i.e., if it is -3.5%, please select “A value between -3% and -4%” A value between -9% and -10% A value between -8% and -9% None of the other answers are correct. A value between -7% and -8% A value between -10% and -11%
Please answer if 100% sure
(Bond valuation) You own a bond that pays $120 in annual interest, with a $1,000 par value. It matures in 20 years. Your required rate of return is 10 percent. a. Calculate the value of the bond. b. How does the value change if your required rate of return (1) increases to 15 percent or (2) decreases to 6 percent? c. Explain the implications of your answers in part b as they relate to interest rate risk, premium bonds, and discount bonds. d. Assume that the bond matures in 3 years instead of 20 years. Recompute your answers in part b. e. Explain the implications of your answers in part d as they relate to interest rate risk, premium bonds, and discount bonds. a. If your required rate of return is 10 percent, what is the value of the bond? $ (Round to the nearest cent.)
Suppose you purchase a zero coupon bond with a face value of $1000, maturing in 20 years, for $213.20. zero coupon bond pay the investor the face value on the maturity date. What is the implicit interest in the first year of the bond's life ?
Fixed Income Securities4. Today is t = 0. You have just bought a five-year zero-coupon Treasurybond with $100 face value. You paid $80.(a) What is the annually compounded yield to maturity on the bond?(b) Suppose that yields at all maturities decrease to 2% immediately after you havepurchased the bond. Calculate the annualized holding period return if you sellthe bond one year after you have purchased it, at t = 1.(c) What is the annually compounded yield to maturity on the bond at t = 1?
211 Suppose that i = 10%. Let $z= 100. What is the present value of the consol? expected present discounted value of a bond that p a. b. If i = 10%, what is the expected present discounted value of a bond that pays 2 (- $100) over the next 10 years? 20 years? 30 years? 60 years? (Hint: Use equation (1) on of for the file-151 Page 5 but remember to adjust for the first payment.) 15155772

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