A U.S. Government T-bond matures in 12 years and has a face value of $100. The bond has a coupon rate of 3.2% paid semi-annually (the next coupon is due in 6 months). The yield on the bond is 5.9%. If coupons are re-invested at 4.2% per annum, then how much interest is earned on re-invested coupons over the life of the bond? Calculate the interest as a percentage of the total cash flows received at maturity by the bondholder. Express your answer in percentage form rounded to the nearest percerit (i.e. no decimals).
A U.S. Government T-bond matures in 12 years and has a face value of $100. The bond has a coupon rate of 3.2% paid semi-annually (the next coupon is due in 6 months). The yield on the bond is 5.9%. If coupons are re-invested at 4.2% per annum, then how much interest is earned on re-invested coupons over the life of the bond? Calculate the interest as a percentage of the total cash flows received at maturity by the bondholder. Express your answer in percentage form rounded to the nearest percerit (i.e. no decimals).
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 U.S. Government T-bond matures in 12 years and has a face value of $100. The
bond has a coupon rate of 3.2% paid semi-annually (the next coupon is due in 6
months). The yield on the bond is 5.9%. If coupons are re-invested at 4.2% per
annum, then how much interest is earned on re-invested coupons over the life of the
bond? Calculate the interest as a percentage of the total cash flows received at
maturity by the bondholder. Express your answer in percentage form rounded to the
nearest percerit (i.e. no decimals).
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