Suppose you purchased a 20-year treasury bond with a 6% annual coupon ten years ago at par value. Today the bond's yield to maturity has changed to 5.5%. a. What's your rate of return if you hold this bond till maturity? b. If you sell this bond now, what will be the internal rate of return you will earn on your investment? c. Should you hold it to maturity or sell it now? Why? Please use and show excel.
Suppose you purchased a 20-year treasury bond with a 6% annual coupon ten years ago at par value. Today the bond's yield to maturity has changed to 5.5%. a. What's your rate of return if you hold this bond till maturity? b. If you sell this bond now, what will be the internal rate of return you will earn on your investment? c. Should you hold it to maturity or sell it now? Why? Please use and show excel.
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 purchased a 20-year treasury bond with a 6% annual
coupon ten years ago at
par value. Today the bond's yield to maturity has changed to 5.5%.
a. What's your rate of return if you hold this bond till maturity?
b. If you sell this bond now, what will be the internal rate of return you will
earn on your
investment?
c. Should you hold it to maturity or sell it now? Why?
Please use and show excel.
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