Suppose you bought a bond with an annual coupon rate of 7.8 percent one year ago for $901. The bond sells for $934 today. a. Assuming a $1,000 face value, what was your total dollar return on this investment over the past year? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b. What was your total nominal rate of return on this investment over the past year? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. If the inflation rate last year was 4.3 percent, what was your total real rate of return on this investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Total dollar return b. Total nominal rate of return % % c. Total real rate of return

Suppose you bought a bond with an annual coupon rate of 7.8 percent one year ago for $901. The bond sells for $934 today. a. Assuming a $1,000 face value, what was your total dollar return on this investment over the past year? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b. What was your total nominal rate of return on this investment over the past year? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. If the inflation rate last year was 4.3 percent, what was your total real rate of return on this investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Total dollar return b. Total nominal rate of return % % c. Total real rate of return

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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Consider a bond that has a price of $1046.76, a coupon rate of 8.8%, a yield to maturity of 8.1%, a face value of $1000, and 10 years to maturity. What is the current yield? Enter your answer as a percentage. Do not include the percentage sign in your answer. Enter your response below. Enter your answer to 2 DECIMAL PLACES. Number %
Suppose that you just bought a four-year $1,000 coupon bond with a coupon rate of 6.5% when the market interest rate is 6.5%. You sell the bond one year later after the market interest rate falls to 4.5%. The rate of return earned on the bond during the year was %. (Round your response to two decimal places.)
At the beginning of the year, you bought a $1,000 par value corporate bond with an annual coupon rate of 8 percent and a maturity date of 19 years. When you bought the bond, it had an expected yield to maturity of 13 percent. Today the bond sells for $ 760. 1. What did you pay for the bond? 2. If you sold the bond at the end of the year, what would be your one-period return on the investment? Assume that you did not receive any interest payment during the holding period.
Suppose you bought a bond a year ago for $993.47. The bond has a price of $949.4 today. It just paid a coupon of $48.79. What was your total return (in percent) over the last year? Answer to two decimals
You bought one of Elkins Manufacturing Co.'s 6.8 percent coupon bonds one year ago for $1,054. These bonds make annual payments, mature 15 years from now, and have a par value of $1,000. Suppose you decide to sell your bonds today, when the required return on the bonds is 5 percent. If the inflation rate was 3.6 percent over the past year, what would be your total real return on the investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Total real return %
Suppose that last year, the market price for a certain bond was $10,766. Since then, the price has decreased by 10.4%. If the current yield was 7.5% last year, what is the current yield today? Round your answer to the tenth of a percent.
Consider a bond at par initially issued for a 30-year term. Its nominal rate (annual coupon) is 5%. You buy this bond when it still has 20 years of residual maturity. At that time, the market rate is 8%. A few days after your purchase, the market rate drops to 6% (this assumption is then always verified). You will sell your bond 12 years later (8 years before maturity). What will have been the overall annual profitability of your investment?
1) Explain the concept of interest rate risk in bond investment 2) show a numerical example of it by calculating % changes in price for 1 year and 3-year annual coupon bonds. Assume coupon interest rate = 12%, Yield to Maturity = 6%, Face value= 100. Use 2% increase in YTM (i.e., 6% → 8%).
You purchased a zero-coupon bond one year ago for $283.33. The market interest rate is now 9 percent. Assume semiannual compounding. If the bond had 15 years to maturity when you originally purchased it, what was your total return for the past year? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Assume that you pay $815.36 for a long-term bond that carries a coupon of 7.7%. Over the course of the next 12 months, interest rates drop sharply. As a result, you sell the bond at a price of $958.17. a. Find the current yield that existed on this bond at the beginning of the year. What was it by the end of the one-year holding period? b. Determine the holding period return on this investment. (Hint: See Chapter 4 for the HPR formula.) ... a. The current yield that existed on this bond at the beginning of the year is %. (Round to two decimal places.)
A coupon bond of 8.4 percent with 18 years left to maturity is priced to offer a 6.70 percent yield to maturity. You believe that in one year, the yield to maturity will be 7.4 percent. (Assume interest payments are semiannual.) What would be the total return of the bond in dollars? What would be the total return of the bond in percentage?
You bought one of Great White Shark Repellant Co.'s 7.4 percent coupon bonds one year ago for $1,041. These bonds make annual payments and mature 20 years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 6 percent. The bonds have a par value of $1,000. If the inflation rate was 4 percent over the past year, what was your total real return on investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

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