Problem 5-8 Derive the probability distribution of the 1-year HPR on a 30-year U.S. Treasury bond with a coupon of 4.0% if it is currently selling at par and the probability distribution of its yield to maturity a year from now is as shown in the table below. (Assume the entire 4.0% coupon is paid at the end of the year rather than every 6 months. Assume a par value of $100.) (Leave no cells blank - be certain to enter "O" wherever required. Negative values should be indicated by minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) Economy Boom Normal Growth Recession Probability YTM Price Capital Gain Coupon Interest HPR 0.20 11.0 % $ 4.00 % 0.60 9.0 % 4.00 % 0.20 7.0 % 4.00 %
Problem 5-8 Derive the probability distribution of the 1-year HPR on a 30-year U.S. Treasury bond with a coupon of 4.0% if it is currently selling at par and the probability distribution of its yield to maturity a year from now is as shown in the table below. (Assume the entire 4.0% coupon is paid at the end of the year rather than every 6 months. Assume a par value of $100.) (Leave no cells blank - be certain to enter "O" wherever required. Negative values should be indicated by minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) Economy Boom Normal Growth Recession Probability YTM Price Capital Gain Coupon Interest HPR 0.20 11.0 % $ 4.00 % 0.60 9.0 % 4.00 % 0.20 7.0 % 4.00 %
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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Transcribed Image Text:Problem 5-8
Derive the probability distribution of the 1-year HPR on a 30-year U.S. Treasury bond with a coupon of 4.0% if it is currently selling at
par and the probability distribution of its yield to maturity a year from now is as shown in the table below. (Assume the entire 4.0%
coupon is paid at the end of the year rather than every 6 months. Assume a par value of $100.) (Leave no cells blank - be certain to
enter "O" wherever required. Negative values should be indicated by minus sign. Do not round intermediate calculations. Round
your answers to 2 decimal places.)
Economy
Boom
Normal Growth
Recession
Probability
YTM
Price
Capital Gain
Coupon
Interest
HPR
0.20
11.0 %
$
4.00
%
0.60
9.0 %
4.00
%
0.20
7.0 %
4.00
%
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