How much would you pay for a perpetual bond that pays an annual coupon of $80 per year and yields on competing instruments are 20%? You would pay $. (Round your response to the nearest penny.) Part 2 If competing yields are expected to change to 8%, what is the current yield on this same bond assuming that you paid $400? The current yield is %. (Round your response to the nearest integer.) Part 3 If you sell this bond in exactly one year, having paid $400, and received exactly one coupon payment, what is your total return if competing yields are 8%? Your total return is %. (Round your response to two decimal places.)
How much would you pay for a perpetual bond that pays an annual coupon of $80 per year and yields on competing instruments are 20%? You would pay $. (Round your response to the nearest penny.) Part 2 If competing yields are expected to change to 8%, what is the current yield on this same bond assuming that you paid $400? The current yield is %. (Round your response to the nearest integer.) Part 3 If you sell this bond in exactly one year, having paid $400, and received exactly one coupon payment, what is your total return if competing yields are 8%? Your total return is %. (Round your response to two decimal places.)
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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Question
How much would you pay for a perpetual bond that pays an annual coupon of $80 per year and yields on competing instruments are 20%?
You would pay $.
(Round your response to the nearest penny.)
Part 2
If competing yields are expected to change to 8%, what is the current yield on this same bond assuming that you paid
$400?
The current yield is %. (Round your response to the nearest integer.)
Part 3
If you sell this bond in exactly one year, having paid $400, and received exactly one coupon payment, what is your total return if competing yields are 8%?
Your total return is %. (Round your response to two decimal
places.)
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