A5-year government bond with a face value of £100 makes annual coupon payments of 6 per cent and offersa yield to maturity of 4 per cent compounded annually. Suppose that one year later bond yields for bonds of this risk class have fallen to 3 per cent. What is (i) the price of the bond in one year (to the nearest £0.01) and (i) the rate of return (to the nearest 0.01%) which the bondholder has earned over the 12-month period from today to one year from now? Select an answer and submit. For keyboard navigation, use the up/down arrow keto select an answer. a )E108.90 and (i) 7.579% ) E111.15 and (ii) 4.00% ) E111.15 and (ii) 7.579% None of the above e 1) E108.90 and (ii) 4.00%
A5-year government bond with a face value of £100 makes annual coupon payments of 6 per cent and offersa yield to maturity of 4 per cent compounded annually. Suppose that one year later bond yields for bonds of this risk class have fallen to 3 per cent. What is (i) the price of the bond in one year (to the nearest £0.01) and (i) the rate of return (to the nearest 0.01%) which the bondholder has earned over the 12-month period from today to one year from now? Select an answer and submit. For keyboard navigation, use the up/down arrow keto select an answer. a )E108.90 and (i) 7.579% ) E111.15 and (ii) 4.00% ) E111.15 and (ii) 7.579% None of the above e 1) E108.90 and (ii) 4.00%
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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Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
Question
Transcribed Image Text:A5-year government bond with a face value of £100 makes annual coupon payments of 6 per cent and offers a yield to maturity of
4 per cent compounded annually. Suppose that one year later bond yields for bonds of this risk class have fallen to 3 per cent.
What is (0 the price of the bond in one year (to the nearest £0.01) and (ii) the rate of return (to the nearest 0.0196) which the
bondholder has eamed over the 12-month period from today to one year from now?
Select an answer and submit. For keyboard navigation, use the up/down arrow kepto select an answer.
a
)E108.90 and (ii) 7.57%
) E111.15 and (ii) 4.00%
)E111.15 and (ii) 7.579%
None of the above
e
) E108.90 and (ii) 4.00%
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