At the beginning of the year, you bought a $1,000 par value corporate bond with an annual coupon rate of 8 percent and a maturity date of 19 years. When you bought the bond, it had an expected yield to maturity of 13 percent. Today the bond sells for $ 760. 1. What did you pay for the bond? 2. If you sold the bond at the end of the year, what would be your one-period return on the investment? Assume that you did not receive any interest payment during the holding period.
At the beginning of the year, you bought a $1,000 par value corporate bond with an annual coupon rate of 8 percent and a maturity date of 19 years. When you bought the bond, it had an expected yield to maturity of 13 percent. Today the bond sells for $ 760. 1. What did you pay for the bond? 2. If you sold the bond at the end of the year, what would be your one-period return on the investment? Assume that you did not receive any interest payment during the holding period.
Chapter6: Fixed-income Securities: Characteristics And Valuation
Section: Chapter Questions
Problem 8P
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![At the beginning of the year, you bought a $1,000 par value corporate bond with an annual coupon rate of 8
percent and a maturity date of 19 years. When you bought the bond, it had an expected yield to maturity of 13
percent. Today the bond sells for $ 760.
1. What did you pay for the bond?
2. If you sold the bond at the end of the year, what would be your one-period return on the investment?
Assume that you did not receive any interest payment during the holding period.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F40dec75b-202e-48f2-b9a1-f67633727e66%2Faa58f25f-064c-41fb-a97b-3b088fb62723%2Fqhuu3f_processed.png&w=3840&q=75)
Transcribed Image Text:At the beginning of the year, you bought a $1,000 par value corporate bond with an annual coupon rate of 8
percent and a maturity date of 19 years. When you bought the bond, it had an expected yield to maturity of 13
percent. Today the bond sells for $ 760.
1. What did you pay for the bond?
2. If you sold the bond at the end of the year, what would be your one-period return on the investment?
Assume that you did not receive any interest payment during the holding period.
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