Une year ago, an investor purchased a 10-year 8% annual coupon bond at par of $1,000. Today (with 9 years to maturity) the bond is priced to yield 7.10%. If the bond is sold, what is the total return to the investor (interest plus appreciation) for the 1-year holding period? Hint: The total return includes the coupon rate plus the appreciation (or depreciation) due to the change in rates. Therefore, calculate the current price based on the yield, and then calculate the total return over 1 year based on that price and the coupon payment. Your answer should be between 6.32 and 17.42, rounded to 2 decimal places, with no special characters.
Une year ago, an investor purchased a 10-year 8% annual coupon bond at par of $1,000. Today (with 9 years to maturity) the bond is priced to yield 7.10%. If the bond is sold, what is the total return to the investor (interest plus appreciation) for the 1-year holding period? Hint: The total return includes the coupon rate plus the appreciation (or depreciation) due to the change in rates. Therefore, calculate the current price based on the yield, and then calculate the total return over 1 year based on that price and the coupon payment. Your answer should be between 6.32 and 17.42, rounded to 2 decimal places, with no special characters.
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:One year ago, an investor purchased a 10-year 8% annual coupon bond at par of $1,000. Today (with 9
years to maturity) the bond is priced to yield 7.10%. If the bond is sold, what is the total return to the
investor (interest plus appreciation) for the 1-year holding period?
Hint: The total return includes the coupon rate plus the appreciation (or depreciation) due to the change in
rates. Therefore, calculate the current price based on the yield, and then calculate the total return over 1
year based on that price and the coupon payment.
Your answer should be between 6.32 and 17.42, rounded to 2 decimal places, with no special characters.
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