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.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter2: The Domestic And International Financial Marketplace

Section: Chapter Questions

Problem 5P

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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 7.40%. If the bond is sold, what is the total return to the investor (interest plus appreciation) for the 1-vear 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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