You bought one of Great White Shark Repellant Company's 8.4 percent coupon bonds one year ago for $1,048. These bonds make annual payments and mature 11 years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 7 percent. The bonds have a par value of $1,000. If the inflation rate was 2.6 percent over the past year, what was your total real return on investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Total real return %

You bought one of Great White Shark Repellant Company's 8.4 percent coupon bonds one year ago for $1,048. These bonds make annual payments and mature 11 years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 7 percent. The bonds have a par value of $1,000. If the inflation rate was 2.6 percent over the past year, what was your total real return on investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Total real return %

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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Phil bought Bond A one year ago for $1,000. Currently the bond sells for $1,210 and has 10 years remaining to maturity with a 9% coupon rate. What do you know about Phil's bond rate of return over the past year compared to the YTM today? O Phil's rate of return YTMI
You wish to sell a bond that has a face valueof $5,000. The bond bears an interest rate of 7.5%,which is payable quarterly. Six years ago, the bondwas purchased at $4,800. At least a 9% annual returnon the investment is desired. What must be the minimum selling price of the bond now in order to makethe desired return on the investment?
You just borrowed $15,000 from a finance company to start a business. If you are required to repay $16,800 interest and principal in one year, and inflation is 4.0%, what is the expected real rate of interest?
You just bought a bond (M=$1000, CR=10%, n=20 years, semiannual coupon pay yielding 10.5%. If you sell the bond one year from today when the yield is 9.75%, what would be your realized (actual) rate of return (before-tax)? 16.996%
You just bought a newly issued bond which has a face value of $1,000 and pays its coupon once annually. Its coupon rate is 6%, maturity is 20 years and the yield to maturity for the bond is currently 8%. Suppose that one year after you bought the bond, the yield to maturity of the bond declines to 7%. Find the (before-tax) total dollar return (dollar returns from the coupon payment and capital gains) for the one-year investment period.
You purchased a bond for 725. The bond has a coupon rate of 8 percent, which is paid semiannually. It matures in 6 years and has a par value of 1,000. What is your expected rate of return?
You bought a eight-year corporate bond two years ago at $950 per bond immediately after the annual coupon payment. The corporate bond has a face value of $1,000 and pays an annual coupon of 6% per annum. You sold the bond at a yield to maturity of 5% per annum today. What is your realised compound yield if you reinvested cash at 5% per annum?
You purchased a zero coupon bond one year ago for $120.36. The bond has a par value of $1,000 and the market interest rate is now 13 percent. If the bond had 17 years to maturity when you originally purchased it, what was your total return for the past year? Assume semiannual compounding.
Taussig Corp.'s bonds currently sell for $1,220. They have a 6.35% annual coupon rate and a 20-year maturity, but they can be called in 5 years at $1,050. What rate of return should an investor expect to earn if he or she purchases these bonds?
You purchase a 20-year bond that has a par value of $1,000 and pays an annual coupon of $100 ($50 every six months). The yield to maturity was 6.0 percent when you purchased this bond. Now, right after you purchased this bond, the yield (reinvestment rate) went up to 13.0 percent (6.5 percent every six months). Determine your realized compounded yield if you hold this bond for 10 years, then sell it, and reinvestment rates stay at 13.0 percent for the entire 10-year period. The yield-to-maturity when you sell the bond is also 13.0 percent. Enter your answer in decimal format, to four decimal places. For example, if your answer is 3.11%, enter "0.0311". Note that Canvas will delete trailing zeros, if entered.
Today you buy ten zero-coupon bonds which will mature in exactly 5 years. Each of these ten bonds has a face value of $100. The price you pay today for each of these bonds is $82. Assume a year goes by. Now there are only 4 years left before these bonds mature. You sell these bonds in the market for $75 per bond. What is the return you have realized on your investment in these bonds? -7.00% -9.26% -8.54% We do not have sufficient information about interest rates to calculate this answer. -9.33%
One year ago you purchased a bond for $9,000 with a coupon rate of 3%. Today the price is $8,900. Write the expression to find the rate of return of the bond over the last year.

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