a) What is the value of a 10 year, 8.2% coupon bond with semiannual coupons.Assume the par value of the bond is $100 and it is redeemable at par. The interest rate (nominal, converted semiannually) is 10.6%. b) An investor purchased a bond that pays $5 coupons annually at the end of every year for five years. The purchase price was $100 and it was redeemed at par after five years. If the annual effective inflation rate over the time period was 3%, calculate the real rate of return earned by the investor on this bond.
a) What is the value of a 10 year, 8.2% coupon bond with semiannual coupons.Assume the par value of the bond is $100 and it is redeemable at par. The interest rate (nominal, converted semiannually) is 10.6%. b) An investor purchased a bond that pays $5 coupons annually at the end of every year for five years. The purchase price was $100 and it was redeemed at par after five years. If the annual effective inflation rate over the time period was 3%, calculate the real rate of return earned by the investor on this bond.
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) What is the value of a 10 year, 8.2% coupon bond with semiannual coupons.Assume the par
b) An investor purchased a bond that pays $5 coupons annually at the end of every
year for five years. The purchase price was $100 and it was redeemed at par after five
years. If the annual effective inflation rate over the time period was 3%, calculate the real
rate of return earned by the investor on this bond.
year for five years. The purchase price was $100 and it was redeemed at par after five
years. If the annual effective inflation rate over the time period was 3%, calculate the real
rate of return earned by the investor on this bond.
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