Suppose you purchase a ten-year bond with 12% annual coupons. You hold the bond for four years and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 10.64% when you purchased and sold the bond, a. What cash flows will you pay and receive from your investment in the bond per $100 face value? b. What is the internal rate of return of your investment? Note: Assume annual compounding. a. What cash flows will you pay and receive from your investment in the bond per $100 face value? The cash flow at time 1-3 is $ (Round to the nearest cent. Enter a cash outflow as a negative number.) The cash outflow at time 0 is $ number.) (Round to the nearest cent. Enter a cash outflow as a negative The total cash flow at time 4 (after the fourth coupon) is $ outflow as a negative number.) b. What is the internal rate of return of your investment? The internal rate of return of your investment is (Round to the nearest cent. Enter a cash %. (Round to two decimal places.)
Suppose you purchase a ten-year bond with 12% annual coupons. You hold the bond for four years and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 10.64% when you purchased and sold the bond, a. What cash flows will you pay and receive from your investment in the bond per $100 face value? b. What is the internal rate of return of your investment? Note: Assume annual compounding. a. What cash flows will you pay and receive from your investment in the bond per $100 face value? The cash flow at time 1-3 is $ (Round to the nearest cent. Enter a cash outflow as a negative number.) The cash outflow at time 0 is $ number.) (Round to the nearest cent. Enter a cash outflow as a negative The total cash flow at time 4 (after the fourth coupon) is $ outflow as a negative number.) b. What is the internal rate of return of your investment? The internal rate of return of your investment is (Round to the nearest cent. Enter a cash %. (Round to two decimal places.)
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:Suppose you purchase a ten-year bond with 12% annual coupons. You hold the bond for four years and sell
it immediately after receiving the fourth coupon. If the bond's yield to maturity was 10.64% when you
purchased and sold the bond,
a. What cash flows will you pay and receive from your investment in the bond per $100 face value?
b. What is the internal rate of return of your investment?
Note: Assume annual compounding.
a. What cash flows will you pay and receive from your investment in the bond per $100 face value?
The cash flow at time 1-3 is $
(Round to the nearest cent. Enter a cash outflow as a negative number.)
The cash outflow at time 0 is $
number.)
(Round to the nearest cent. Enter a cash outflow as a negative
The total cash flow at time 4 (after the fourth coupon) is $. (Round to the nearest cent. Enter a cash
outflow as a negative number.)
b. What is the internal rate of return of your investment?
The internal rate of return of your investment is %. (Round to two decimal places.)
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