Suppose that you purchased a Ba rated $1000 annual coupon bond with an 8.9% coupon rate and a 20-year maturity at par value. The current rate on 20-year US treasuries is 3%. Two years later, you sell the bond, and for a yield of 9.847%, what was your capital gain (+) or capital loss (-) in dollars and cents? (make your answer positive for a gain, negative for a loss)

Suppose that you purchased a Ba rated $1000 annual coupon bond with an 8.9% coupon rate and a 20-year maturity at par value. The current rate on 20-year US treasuries is 3%. Two years later, you sell the bond, and for a yield of 9.847%, what was your capital gain (+) or capital loss (-) in dollars and cents? (make your answer positive for a gain, negative for a loss)

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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What is the price of a bond with a coupon rate of 4% making semi-annual payments with a face value of $1,000 that matures in 10 years when a. the YTM on the bond is 8.6%? B. the Y IM Is 6.6%? C. the YTM is 5.0%? d. What is the relationship between YTM and price?
Suppose that you own a 1-year bond with a 10% coupon rate, a yield of 2%, and a face value of $1,000. Suppose further that you took out a 1-year loan of $900 at 2% (you lucky devil, you!) to help start your new food truck business. Calculate your net worth (assets minus liabilities) if all interest rates rise from 2% to 3%. ___________
You just bought a bond (M=$1000, CR=10%, n=20 years, semiannual coupon pay yielding 10.5%. If you sell the bond one year from today when the yield is 9.75%, what would be your realized (actual) rate of return (before-tax)? 16.996%
You just bought a newly issued bond which has a face value of $1,000 and pays its coupon once annually. Its coupon rate is 6%, maturity is 20 years and the yield to maturity for the bond is currently 8%. Suppose that one year after you bought the bond, the yield to maturity of the bond declines to 7%. Find the (before-tax) total dollar return (dollar returns from the coupon payment and capital gains) for the one-year investment period.
Please show work You want to purchase a bond that will pay you $300 per year for the next four years. If the annual interest rate is 4%, then what is the price of your bond if the market is in equilibrium? You buy a stock that is expected to pay a dividend of $300 per year for the next four years. If the discount rate is 5.5%, then what is the stock price in this case? Is this result the one you would expect when comparing this answer to the one you obtained in question 3? Why or why not?
4. You bought a 10-year, 5% coupon bond for $1,000 and sold it 1 year later for $1,100. What is the rate of return on your investment if the bond pays interest annually? If your marginal tax rate is 30%, and 50% of capital gains are taxable, what is the after-tax rate of return on your bond investment?
Suppose your firm issues a €100,000,000 5-year bond with a coupon rate of 8% per annum (assume annual compounding). The bond will sell at face value to investors. The underwriting spread is an up-front fee of 2%. What is the actual cost of this debt? Please enter your answer as % -- e.g. if your answer is 2.34% type in 2.34.
You buy a zero-coupon bond with a face value of $16,000 that matures in 10 years for $7,000. What is your annual compound rate of return?
D4) Suppose that there is 30-year coupon bond with par value of $100 and Macaulay duration of 20.56. The coupon rate is unknown. Currently, the bond is traded at $90 and the yield is flat at 20% pa. Yield to maturity is an annualized simple interest rate compounded annually. If the bond yield increases by 50 basis points, what is the approximation of the percentage capital gain or loss? Please choose the correct range for the percentage capital gain/loss, i.e., if it is -3.5%, please select “A value between -3% and -4%” A value between -9% and -10% A value between -8% and -9% None of the other answers are correct. A value between -7% and -8% A value between -10% and -11%
You buy a bond today that has a coupon rate of 6.5%, with 10 years to maturity, and is trading at a YTM of 5.6% Assume that one year later, the bond is trading at a YTM of 5.0% What was the annual percentage return you earned by owning the bond? TIP: The annual return on a bond is equal to (Price(1) - P(0) + Coupon Payments)/P(0) See textbook, Section 6.4 Bond Rates of Return. Remember that when you calculate the value of the bond in one year, you will have received two coupons. Also, when you use the above formula, the prices of the bonds P(0) and P(1), as well as the coupons, should be calculated as dollars, not percentages of par value.
Suppose that you purchased a Baa rated $1000 annual coupon bond with a 3.8% coupon rate and a 10-year maturity at 2% above par value. What would the current yield (in %) be at the time of purchase (4 digits)?
Fixed Income Securities4. Today is t = 0. You have just bought a five-year zero-coupon Treasurybond with $100 face value. You paid $80.(a) What is the annually compounded yield to maturity on the bond?(b) Suppose that yields at all maturities decrease to 2% immediately after you havepurchased the bond. Calculate the annualized holding period return if you sellthe bond one year after you have purchased it, at t = 1.(c) What is the annually compounded yield to maturity on the bond at t = 1?

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