Assume that you purchase a 30-year $1,000 par value bond, with a 10% coupon, and a yield of 8%. Immediately after you purchase the bond, yields change to 8% and remain at that level to maturity. Assume that you hold the bond for 6 years and then sell it. Interest is paid annually. What is the price of the bond today? What is the price of the bond after 7 years? Now, calculate the realized horizon yield for this bond if you hold it for 7 years and then sell it.
Assume that you purchase a 30-year $1,000 par value bond, with a 10% coupon, and a yield of 8%. Immediately after you purchase the bond, yields change to 8% and remain at that level to maturity. Assume that you hold the bond for 6 years and then sell it. Interest is paid annually. What is the price of the bond today? What is the price of the bond after 7 years? Now, calculate the realized horizon yield for this bond if you hold it for 7 years and then sell it.
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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Please show work other than in excel.
Assume that you purchase a 30-year $1,000 par value bond , with a 10% coupon, and a yield of
8%. Immediately after you purchase the bond, yields change to 8% and remain at that level to
maturity. Assume that you hold the bond for 6 years and then sell it. Interest is paid annually.
What is the price of the bond today?
What is the price of the bond after 7 years?
Now, calculate the realized horizon yield for this bond if you hold it for 7 years and then sell it.
8%. Immediately after you purchase the bond, yields change to 8% and remain at that level to
maturity. Assume that you hold the bond for 6 years and then sell it. Interest is paid annually.
What is the price of the bond today?
What is the price of the bond after 7 years?
Now, calculate the realized horizon yield for this bond if you hold it for 7 years and then sell it.
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