An investor purchases a nine-year, 7% annual coupon payment bond at a price equal to par value. Afterthe bond is purchased and before the first coupon is received, interest rates increase to 8%. The investorsells the bond after five years. Assume that interest rates remain unchanged at 8% over the five-yearholding period.Assuming that all coupons are reinvested over the holding period, the investor's five-year horizon yield isclosest to:1. 5.66%2. 6.62%3. 7.12%

An investor purchases a nine-year, 7% annual coupon payment bond at a price equal to par value. Aft the bond is purchased and before the first coupon is received, interest rates increase to 8%. The invest sells the bond after five years. Assume that interest rates remain unchanged at 8% over the five-year holding period. Assuming that all coupons are reinvested over the holding period, the investor's five-year horizon yiel closest to: 1. 5.66% 2.6.62%

An investor purchases a nine-year, 7% annual coupon payment bond at a price equal to par value. Aft the bond is purchased and before the first coupon is received, interest rates increase to 8%. The invest sells the bond after five years. Assume that interest rates remain unchanged at 8% over the five-year holding period. Assuming that all coupons are reinvested over the holding period, the investor's five-year horizon yiel closest to: 1. 5.66% 2.6.62%

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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An investor has two bonds in his portfolio that have a face value of $1,000 and pay a 12% annual coupon. Bond L matures in 15 years, while Bond S matures in 1 year. a. What will the value of the Bond L be if the going interest rate is 6%, 8%, and 13% ? Assume that only one more interest payment is to be made on Bond S at its maturity and that 15 more payments are to be made on Bond L. Round your answers to the nearest cent. 6% Bond L $ Bond S $ $ $ -Select- 8% $ $ 13% b. Why does the longer-term bond's price vary more than the price of the shorter-term bond when interest rates change? I. Long-term bonds have lower reinvestment rate risk than do short-term bonds. II. The change in price due to a change in the required rate of return increases as a bond's maturity decreases. III. Long-term bonds have greater interest rate risk than do short-term bonds. IV. The change in price due to a change in the required rate of return decreases as a bond's maturity increases. V. Long-term bonds have…
Assume the coupon rate is 10% issue at par $1000 and for 15 years. Let say the market interest rate increase to 15% during the life of the bond. a) What is the interest payment for this bond annually b) What is the interest payment on semi-annually c) How much should the investors pay for this bondi.e. the value
A 8% coupon bond has a par value of $1,000 and a yield-to-maturity of 8%. You purchase the bond when it has exactly 12 years remaining until maturity. You hold the bond for 6 months, collect the coupon payment, and then sell the bond immediately. If the bond's yield-to-maturity is 4% when you sell it, what is your percentage return over this 6-month holding period? Enter your answer as a decimal and show 4 decimal places. For example, if your answer is 6.25%, enter .0625.
on Assume that you purchase a 30-year stripped bond with a $100,000 face value. The current bond price is $9,937.73 and the yield is 8%. Calculate the interest revenue during the first year of holding the bond. Calculate amounts to nearest dollar, no $. Answer:
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