A 5-year government bond makes annual coupon payments of 5.3% and offers a yield of 3.3% annually compounded. Assume face value is $1,000. Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. a. Suppose that one year later the bond still yields 3.3%. What return has the bondholder earned over the 12-month period? b. Now suppose that the bond yields 2.3% at the end of the year. What return did the bondholder earn in this case?
A 5-year government bond makes annual coupon payments of 5.3% and offers a yield of 3.3% annually compounded. Assume face value is $1,000. Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. a. Suppose that one year later the bond still yields 3.3%. What return has the bondholder earned over the 12-month period? b. Now suppose that the bond yields 2.3% at the end of the year. What return did the bondholder earn in this case?
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
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Transcribed Image Text:A 5-year government bond makes annual coupon payments of 5.3% and offers a yield of 3.3% annually compounded. Assume face
value is $1,000.
Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.
a. Suppose that one year later the bond still yields 3.3%. What return has the bondholder earned over the 12-month period?
b. Now suppose that the bond yields 2.3% at the end of the year. What return did the bondholder earn in this case?
a. Rate of return
b. Rate of return
%
%
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