A 5-year government bond with a face value of £100 makes annual coupon payments of 6 per cent and offers a yield to maturity of 4 per cent compounded annually. Suppose that one year later bond yields for bonds of this risk class have fallen to 3 per cent. What is (i) the price of the bond in one year (to the nearest £0.01) and (ii) the rate of return (to the nearest 0.01%) which the bondholder has earned over the 12-month period from today to one year from now? (i) £108.90 and (ii) 7.57% b (i) £111.15 and (ii) 4.00% c (i) £111.15 and (ii) 7.57% d None of the above e (i) £108.90 and (ii) 4.00%
A 5-year government bond with a face value of £100 makes annual coupon payments of 6 per cent and offers a yield to maturity of 4 per cent compounded annually. Suppose that one year later bond yields for bonds of this risk class have fallen to 3 per cent. What is (i) the price of the bond in one year (to the nearest £0.01) and (ii) the rate of return (to the nearest 0.01%) which the bondholder has earned over the 12-month period from today to one year from now? (i) £108.90 and (ii) 7.57% b (i) £111.15 and (ii) 4.00% c (i) £111.15 and (ii) 7.57% d None of the above e (i) £108.90 and (ii) 4.00%
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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A 5-year government bond with a face value of £100 makes annual coupon payments of 6 per cent and offers a yield to maturity of 4 per cent compounded annually. Suppose that one year later bond yields for bonds of this risk class have fallen to 3 per cent. What is (i) the price of the bond in one year (to the nearest £0.01) and (ii) the
(i) £108.90 and (ii) 7.57%
b
(i) £111.15 and (ii) 4.00%
c
(i) £111.15 and (ii) 7.57%
d
None of the above
e
(i) £108.90 and (ii) 4.00%
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