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- NoneTrue or false? the YTM is the annual return that an investor earns on a bond of the investor purchases the bond today and sells it before maturityWhat is a bond's yield to maturity (YTM)? A. The expected return you'll earn if the bond issuer defaults B. The return you have made if you sell the bond today C. The same as the bond's coupon rate D. The return you'll earn if you hold the bond to maturity and yields stay the same
- What do you have to do to the interest rate and years of maturity if a bond pricing problem tells you that interest is compounded quarterly?What would be the value of the bond described in Part d if, just after it had been issued, the expected inflation rate rose by 3 percentage points, causing investors to require a 13% return? Would we now have a discount or a premium bond? What would happen to the bond’s value if inflation fell and rd declined to 7%? Would we now have a premium or a discount bond? What would happen to the value of the 10-year bond over time if the required rate of return remained at 13%? If it remained at 7%? (Hint: With a financial calculator, enter PMT, I/YR, FV, and N, and then change N to see what happens to the PV as the bond approaches maturity.)The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy a bond with an annual coupon rate of 10 percent for $1, 120. The bond has 17 years to maturity. What rate of return do you expect to earn on your investment?
- d. If you hold the bonds for one year, and interest rates do not change, what total rate of return will you earn, assuming that you pay the market price? Why is this different from the current yield and YTM?The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy a bond with an annual coupon rate of 9 percent for $1,040. The bond has 18 years to maturity. What rate of return do you expect to earn on your investment? Assume a par value of $1,000. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b- Two years from now, the YTM on your bond has declined by 1 percent, and you 1. decide to sell. What price will your bond sell for? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b- What is the HPY on your investment? (Do not round intermediate calculations and 2. enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected rate of return a. b-1. Bond price b-2. HPY %The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy a bond with an annual coupon of 11 percent for $1,130. The bond has 18 years to maturity. What rate of return do you expect to earn on your investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b-1. Two years from now, the YTM on your bond has declined by 1 percent and you decide to sell. What
- Suppose today you buy a coupon bond that you plan to sell one year later. Which of the rate of return formula incorporates future changes into the bond's price?The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy a bond with an annual coupon of 10 percent for $1,120. The bond has 17 years to maturity. What rate of return do you expect to earn on your investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b- Two years from now, the YTM on your bond has declined by 1 percent and you 1. decide to sell. What price will your bond sell for? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b- What is the HPY on your investment? (Do not round intermediate calculations and 2. enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Expected rate of return b-1. Bond price b-2. HPY % %The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a.Suppose that today you buy a bond with an annual coupon rate of 6 percent for $1,150. The bond has 20 years to maturity. What rate of return do you expect to earn on your investment? Assume a par value of $1,000. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)b-1.Two years from now, the YTM on your bond has declined by 1 percent, and you decide to sell. What price will your bond sell for? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)b-2.What is the HPY on your investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
