A government bond matures in 7 years, makes annual coupon payments of 5.1% and offers a yield of 3.1% annually compounded.Assume face value is $1,000. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimalplaces.)a. Suppose that one year later the bond still yields 3.1%. What return has the bondholder earned over the 12-month period?Rate of returnb. Now suppose that the bond yields 2.1% at the end of the year. What return did the bondholder earn in this case?Rate of return

A bond is an instrument that represents the loan that is made by the investor to the company and…

Answered: A government bond matures in 7 years,…

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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Hello Can you show how the computation was made from the solutions guide
You purchased a bond for 1,100. The bond has a coupon rate of 9 percent, which is paid semiannually. It matures in 17 years and has a par value of 1,000. What is your expected rate of return. How can i solve this with a financial calculator?
You have a risk-free bond with 2 years to maturity. The bond has a face value of $ 1000 and a coupon rate of 5%. The next coupon will be paid one year from now, and the bond pays annual coupons. a. What is the price of the bond? What is its own yield to maturity? Is it trading at a discount or at a premium? b. Suppose you buy the 2-year bond above, and you sell it after one year. What is the expected return on your investment?Kindly solve the question in 10 mins. It is urgent.
A zero-coupon bond has a $100 face value, matures in 10 years and currently sells for $781.20 . a What is the market’s required return on this bond? b Suppose you hold this bond for one year and sell it. At the time you sell the bond, market rates have increased to 3.5%. What return did you earn on this bond? c Suppose that, rather than buying the 10-year zero-coupon bond described at the start of this problem, you instead purchased a 10-year 2.5% coupon bond. (Assume annual payments.) Because the bond’s coupon rate equalled the market’s required return at the time of purchase, you paid face value ($100) to acquire the bond. Again assume that you held the bond for one year, received one coupon payment, and then sold the bond, but that at the time of sale, the market’s required return was 3.5%. What was your return for the year? Compare your answerhere to your answer in part (b)
Solve it correctly please. I will rate accordingly.
A 30-year maturity bond making annual coupon payments with a coupon rate of 11.00% has a ation of 13.50 years. The bond currently sells at a yield to maturity of 5.75%. Ducation a. Find the exact dollar price of the bond if its yield to maturity falls to 4.75%. What is the % change in price? b. Assume that you need to make a quick approximation using the duration rule. What is the % change in price as approximated by the duration rule when the yield to maturity falls to 4.75%? c. Does the duration-rule provide a good approximation of the % price change in this case? Why or why not?
Suppose that a bond has a face value of $200 000 and its maturity date is 10 years from now. The coupon rate is 5% payable semi-annually. Find the fair price of this bond, assuming that the annual market rate is 4%.
A bond has 10 years until maturity, a coupon rate of 8.1%, and sells for $1,190. Interest is paid annually. (Assume a face value of $1,000.) a. If the bond has a yield to maturity of 9.9% 1 year from now, what will its price be at that time? Note: Do not round intermediate calculations. Round your answer to nearest whole number. Price b. What will be the rate of return on the bond? Note: Do not round intermediate calculations. 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? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign. Real rate of return %
1. Consider a real return bond with a face value of $15,000 and a coupon yield of 5.2%. What is the coupon payment after one year if the inflation rate is 6.8%? Select one: a) $817.44 b) $833.04 c) $825.24 d) $809.64 I
Consider a zero coupon bond that promises to pay $100 each year for the next three years. Suppose we observe the set of zero coupon bond prices and its yields as below a) What is the price of this zero coupon bond? What is its yield to maturity? b) If the observe yield on two-year zero coupon bonds falls to 6% per year, but the other rates remain unchanged. What is your estimation of the value of the three-year annuity paying $100 per year? What is its yield to maturity?
Consider a bond at par initially issued for a 30-year term. Its nominal rate (annual coupon) is 5%. You buy this bond when it still has 20 years of residual maturity. At that time, the market rate is 8%. A few days after your purchase, the market rate drops to 6% (this assumption is then always verified). You will sell your bond 12 years later (8 years before maturity). What will have been the overall annual profitability of your investment?
Suppose the interest rate on a 1-year government bond is 3.00%, on a 4-year government bond is 3.50% and that on a 6-year government bond is 4.90%. What is the market's forecast for 2-year rates 4 years from now, assuming the pure expectations theory is correct? Show your work.

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