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 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
Price at which the bond is purchased is the present value of all the expected cash flows in the form of coupons and maturity value.
Here,
Face Value "FV" = $1000
Annual coupon rate = 6%
Annual coupon "PMT" = 6%*$1000 = $60
Number of years to maturity "n" = 20
Yield to maturity "YTM" = 8%
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