A Treasury coupon bond has 5-year to maturity with a face value of $1,000 and a current market price of $1,153.99. The bonds pay coupon annually and have a yield to maturity of 4 percent. Jake, a bond speculator, just purchased the bond at the current market price. What will be the YTM in one year if his prediction is accurate? And what will be the market price in one year if the YTM stays at 4%?
A Treasury coupon bond has 5-year to maturity with a face value of $1,000 and a current market price of $1,153.99. The bonds pay coupon annually and have a yield to maturity of 4 percent. Jake, a bond speculator, just purchased the bond at the current market price. What will be the YTM in one year if his prediction is accurate? And what will be the market price in one year if the YTM stays at 4%?
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 Treasury coupon bond has 5-year to maturity with a face value of $1,000 and a current market price of $1,153.99. The bonds pay coupon annually and have a yield to maturity of 4 percent. Jake, a bond speculator, just purchased the bond at the current market price. What will be the YTM in one year if his prediction is accurate? And what will be the market price in one year if the YTM stays at 4%?
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