Suppose that Bernie Sanders has an investment horizon of 3 years. He wants to buy a 7yr 9% coupon bond, semiannual pay, yielding 10% rate of return. Face value is 1000. What is the price of the bond now? O A. 828.4
Suppose that Bernie Sanders has an investment horizon of 3 years. He wants to buy a 7yr 9% coupon bond, semiannual pay, yielding 10% rate of return. Face value is 1000. What is the price of the bond now? O A. 828.4
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
Transcribed Image Text:Suppose that Bernie Sanders has an investment horizon of 3 years. He wants to buy a 7yr 9% coupon bond, semiannual pay, yielding 10% rate of
return. Face value is 1000. What is the price of the bond now?
A. 828.4
B.950.51
C. 1,000
D.974.62
QUESTION 7
QUESTION 8
Use the information in the previous question (i.e., question 7). Bernie thinks he can reinvest the coupon payments at an annual interest rate of
10.2%. Bernie is planning to sell the bond at the end of year 3 when the bond will be selling to yield 12%. What is the annualized yield?
A.
27.69%
B.7.49%
C. 6.21%
D. 6.97%
Expert Solution
Step 1
Information Provided:
- Face value = 1000
- Annual coupon rate = 9%
- Bond period = 7 years
- Annual YTM = 10%
- Frequency of payment = Semi-Annual
NOTE:
- As per our policy, we only answer one question when different questions are posted. Since none is specified, the first question is answered. Please repost the remaining question.
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