A bond with a face value of $1.000 has 10 years until maturity, carries a coupon rate of 7.8%, and sells for $1,120, Interest Is pald annually. (Assume a face value of $1.000 and annual coupon payments.) a. If the bond has a yield to maturity of 10.2% 1 year from now, what will its price be at that time? (Do not round intermediate calculations. Round your answer to nearest whole number.) Price b. What will be the rate of return on the bond? (Do not round Intermediate calculatioris. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign.) Rate of return c. If the inflation rate during the year is 3%, what is the real rate of return on the bond? (Assume annual Interest payments.) (Do not round intermediote calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign.)
A bond with a face value of $1.000 has 10 years until maturity, carries a coupon rate of 7.8%, and sells for $1,120, Interest Is pald annually. (Assume a face value of $1.000 and annual coupon payments.) a. If the bond has a yield to maturity of 10.2% 1 year from now, what will its price be at that time? (Do not round intermediate calculations. Round your answer to nearest whole number.) Price b. What will be the rate of return on the bond? (Do not round Intermediate calculatioris. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign.) Rate of return c. If the inflation rate during the year is 3%, what is the real rate of return on the bond? (Assume annual Interest payments.) (Do not round intermediote calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign.)
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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Transcribed Image Text:A bond with a face value of $1000 has 10 years until maturity, carries a coupon rate of 7.8%, and sells for $1,120. Interest is paid
annually. (Assume a face value of $1.000 and annual coupon payments.)
a. If the bond has a yield to maturity of 10.2% 1 year from now., what will its price be at that time? (Do not round intermediate
calculations. Round your answer to nearest whole number.)
Price
b. What will be the rate of return on the bond? (Do not round intermediate calculatioris. Enter your answer as a percent rounded to
2 decimal places. Negative amount should be indicated by a minus sign.)
Rate of return
c. If the inflation rate during the year is 3%, what is the real rate of return on the bond? (Assume annual Interest payments.) (Do not
round intermediote colculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be
indicated by o minus sign.)
Real rate of return
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