Bonds of Francesca Corporation with a par value of $1,000 sell for $965, mature in five years, and have a 7% annual coupon rate paid semiannually. Do not round Intermediate calculations. Round your answers to two decimal places. Calculate: a. current yield. 7.25 % annually b. yield to maturity, to the nearest basis point. 7.86 % annually c. horizon yield (or realized return) for an investor with a two-year holding period and a reinvestment rate of 6% over the period. At the end of two years, the 7% coupon bonds with three years remaining will sell to yield 7%. % annually 8.99
Bonds of Francesca Corporation with a par value of $1,000 sell for $965, mature in five years, and have a 7% annual coupon rate paid semiannually. Do not round Intermediate calculations. Round your answers to two decimal places. Calculate: a. current yield. 7.25 % annually b. yield to maturity, to the nearest basis point. 7.86 % annually c. horizon yield (or realized return) for an investor with a two-year holding period and a reinvestment rate of 6% over the period. At the end of two years, the 7% coupon bonds with three years remaining will sell to yield 7%. % annually 8.99
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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what is the correct answer to c??
Transcribed Image Text:Bonds of Francesca Corporation with a par value of $1,000 sell for $965, mature in five years, and have a 7% annual coupon rate paid semiannually. Do not
round intermediate calculations. Round your answers to two decimal places. Calculate:
a. current yield.
7.25
% annually
b. yield to maturity, to the nearest basis point.
7.86 % annually
c. horizon yield (or realized return) for an investor with a two-year holding period and a reinvestment rate of 6% over the period. At the end of two years, the
7% coupon bonds with three years remaining will sell to yield 7%.
% annually
8.99
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