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The U.S. Government has a 20-year bond that matures 20 years from now and has a face value of $1,000. The bond has a coupon rate of 3.1% per year, paid semiannually. The yield on the bond is 8%. If coupons are reinvested at 3.6% per annum, then how much interest is earned on reinvested coupons over the life of the bond? Calculate the interest as a percentage of the total cash flows received by the bondholder. What is the amount of interest earned on reinvesting the coupons? $ (Round to the nearest cent.) What percentage of the total cash flows received by the bondholder is the interest earned on the reinvested coupons? % (Round to two decimal places.)

The U.S. Government has a 20-year bond that matures 20 years from now and has a face value of $1,000. The bond has a coupon rate of 3.1% per year, paid semiannually. The yield on the bond is 8%. If coupons are reinvested at 3.6% per annum, then how much interest is earned on reinvested coupons over the life of the bond? Calculate the interest as a percentage of the total cash flows received by the bondholder. What is the amount of interest earned on reinvesting the coupons? $ (Round to the nearest cent.) What percentage of the total cash flows received by the bondholder is the interest earned on the reinvested coupons? % (Round to two decimal places.)

Essentials Of Investments
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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3. The U.S. Government has a 20-year bond that matures 20 years from now and has a face value of $1,000. The bond has a coupon rate of 3.1% per year, paid semiannually. The yield on the bond is 8%. If coupons are reinvested at 3.6% per annum, then how much interest is earned on reinvested coupons over the life of the bond? Calculate the interest as a percentage of the total cash flows received by the bondholder. What is the amount of interest earned on reinvesting the coupons? $ (Round to the nearest cent.) What percentage of the total cash flows received by the bondholder is the interest earned on the reinvested coupons? % (Round to two decimal places.)
Transcribed Image Text:3. The U.S. Government has a 20-year bond that matures 20 years from now and has a face value of $1,000. The bond has a coupon rate of 3.1% per year, paid semiannually. The yield on the bond is 8%. If coupons are reinvested at 3.6% per annum, then how much interest is earned on reinvested coupons over the life of the bond? Calculate the interest as a percentage of the total cash flows received by the bondholder. What is the amount of interest earned on reinvesting the coupons? $ (Round to the nearest cent.) What percentage of the total cash flows received by the bondholder is the interest earned on the reinvested coupons? % (Round to two decimal places.)
The U.S. Govermment 8% coupon bond has 17 vears remaining to maturity. The bond pays annual coupons and the next coupon is due in one year, The face value of the bond is $100. The bond is cu ently trading for $133.82 and yields 5%. If you buy the bond today and hold to maturity, then how much interest do you eam on reinvested coupons (assuming coupons reinvested at the yield rate)? In other words, if you invest the coupons in a bank that pays 5% per annum, then how much interest do you earn just from investing the coupons? How much interest do you eam on reinvested coupons? (Round to the nearest cent.)
Transcribed Image Text:The U.S. Govermment 8% coupon bond has 17 vears remaining to maturity. The bond pays annual coupons and the next coupon is due in one year, The face value of the bond is $100. The bond is cu ently trading for $133.82 and yields 5%. If you buy the bond today and hold to maturity, then how much interest do you eam on reinvested coupons (assuming coupons reinvested at the yield rate)? In other words, if you invest the coupons in a bank that pays 5% per annum, then how much interest do you earn just from investing the coupons? How much interest do you eam on reinvested coupons? (Round to the nearest cent.)
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