Consider a five-year, default-free bond with annual coupons of 8% and a face value of $1,000 and assume zero-coupon yields on default-free securities are as summarized in the following table: Maturity Zero-Coupon Yields 1 year 7.00% 2 years 7.30% 3 years 7.50% 4 years 7.70% a. What is the yield to maturity on this bond? b. If the yield to maturity on this bond increased to 8.20%, what would the new price be? a. What is the yield to maturity on this bond? The yield to maturity on this bond is 7.75 %. (Round to three decimal places.) b. If the yield to maturity on this bond increased to 8.20%, what would the new price be? 5 years 7.80%
Consider a five-year, default-free bond with annual coupons of 8% and a face value of $1,000 and assume zero-coupon yields on default-free securities are as summarized in the following table: Maturity Zero-Coupon Yields 1 year 7.00% 2 years 7.30% 3 years 7.50% 4 years 7.70% a. What is the yield to maturity on this bond? b. If the yield to maturity on this bond increased to 8.20%, what would the new price be? a. What is the yield to maturity on this bond? The yield to maturity on this bond is 7.75 %. (Round to three decimal places.) b. If the yield to maturity on this bond increased to 8.20%, what would the new price be? 5 years 7.80%
Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
7th Edition
ISBN:9780357033609
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Chapter12: Investing In Stocks And Bonds
Section: Chapter Questions
Problem 8FPE: Describe and differentiate between a bonds (a) current yield and (b) yield to maturity. Why are...
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![Consider a five-year, default-free bond with annual coupons of 8% and a face value of $1,000 and assume
zero-coupon yields on default-free securities are as summarized in the following table:
Maturity
Zero-Coupon Yields
1 year
7.00%
2 years
7.30%
3 years
7.50%
4 years
7.70%
a. What is the yield to maturity on this bond?
b. If the yield to maturity on this bond increased to 8.20%, what would the new price be?
a. What is the yield to maturity on this bond?
The yield to maturity on this bond is 7.75 %. (Round to three decimal places.)
b. If the yield to maturity on this bond increased to 8.20%, what would the new price be?
The new price would be $
(Round to the nearest cent.)
5 years
7.80%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F55f59351-6cab-453e-87b8-764174a74643%2Fae28d618-3471-4e25-9d46-256b48e4d726%2Fqulajo_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Consider a five-year, default-free bond with annual coupons of 8% and a face value of $1,000 and assume
zero-coupon yields on default-free securities are as summarized in the following table:
Maturity
Zero-Coupon Yields
1 year
7.00%
2 years
7.30%
3 years
7.50%
4 years
7.70%
a. What is the yield to maturity on this bond?
b. If the yield to maturity on this bond increased to 8.20%, what would the new price be?
a. What is the yield to maturity on this bond?
The yield to maturity on this bond is 7.75 %. (Round to three decimal places.)
b. If the yield to maturity on this bond increased to 8.20%, what would the new price be?
The new price would be $
(Round to the nearest cent.)
5 years
7.80%
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