The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy a bond with an annual coupon of 7 percent for $1,050. The bond has 17 years to maturity. What rate of return do you expect to earn on your investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b- Two years from now, the YTM on your bond has declined by 1 percent and you 1. decide to sell. What price will your bond sell for? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b- What is the HPY on your investment? (Do not round intermediate calculations and 2. enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy a bond with an annual coupon of 7 percent for $1,050. The bond has 17 years to maturity. What rate of return do you expect to earn on your investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b- Two years from now, the YTM on your bond has declined by 1 percent and you 1. decide to sell. What price will your bond sell for? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b- What is the HPY on your investment? (Do not round intermediate calculations and 2. enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
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:The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY).
a. Suppose that today you buy a bond with an annual coupon of 7 percent for $1,050. The bond has 17 years to maturity. What rate of return do you expect to earn on your investment? *(Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)*
b. Two years from now, the YTM on your bond has declined by 1 percent and you decide to sell. What price will your bond sell for? *(Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)*
1. What is the HPY on your investment? *(Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)*
<table>
<tr>
<TD><b>a. Expected rate of return</b></TD>
<TD><input type="text" placeholder="%"></TD>
</tr>
<tr>
<TD><b>b-1. Bond price</b></TD>
<TD><input type="text" placeholder=""></TD>
</tr>
<tr>
<TD><b>b-2. HPY</b></TD>
<TD><input type="text" placeholder="%"></TD>
</tr>
</table>
Note: There are no graphs or diagrams in the image.
Transcribed Image Text:What is the price of a 25-year, zero coupon bond paying $1,000 at maturity, assuming semiannual compounding, if the YTM is: (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
a. 6 percent
b. 8 percent
- $675.00
c. 10 percent
(Note: The image does not contain any graphs or diagrams, only text information.)
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