The value of expected return rate of 30 year bond over the 5 year period. Introduction: The return rate of the portfolio is defined in terms of the expected gain or loss after the maturity period of portfolio. The positive return means gain in the investment. Negative return shows the loss of the portfolio.

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Answer 1

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Chapter 16, Problem 20PS

A

Summary Introduction

To calculate: The value of expected return rate of 30 year bond over the 5 year period.

Introduction: The return rate of the portfolio is defined in terms of the expected gain or loss after the maturity period of portfolio. The positive return means gain in the investment. Negative return shows the loss of the portfolio.

B

Summary Introduction

To calculate: The annual expected return rate of 20 year bond.

Introduction: The return rate is a measurement of the net gain or net loss over a period of time of the portfolio. Return value is a comparison between total incomes with the investment in the portfolio.

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A 30-year maturity bond has a 6.7% coupon rate, paid annually. It sells today for $881.17. A 20-year maturity bond has a 6.2% coupon rate, also paid annually. It sells today for $893.1. A bond market analyst forecasts that in five years, 25-year maturity bonds will sell at yields to maturity of 7.7% and 15-year maturity bonds will sell at yields of 7.2%. Because the yield curve is upward sloping, the analyst believes that coupons will be invested in short-term securities at a rate of 7.2%. a. Calculate the (annualized) expected rate of return of the 30-year bond over the 5-year period. (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. 30-year bond 44.95% b. What is the (annualized) expected return of the 20-year bond? (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. 20-year bond 41.98 X

A 30-year maturity bond has a 7% coupon rate, paid annually. It sells today for $867.42. A 20-year maturity bond has a 6.5% coupon rate, also paid annually. It sells today for $879.50. A bond market analyst forecasts that in five years, 25-year maturity bonds will sell at yields to maturity of 8% and 15-year maturity bonds will sell at yields of 7.5%. Because the yield curve is upward sloping, the analyst believes that coupons will be invested in short-term securities at a rate of 6%.a. Calculate the (annualized) expected rate of return of the 30-year bond over the 5-year period.b. What is the (annualized) expected return of the 20-year bond?

A bond with a face value of $1,000 has 10 years until maturity, carries a coupon rate of 9%, and sells for $1,100. Interest is paid annually. Assume a face value of $1,000 and annual coupon payments.a) If the bond has a yield to maturity of 9% 1 year from now, what will its price be at that time?b) What will be the rate of return on the bond? c) If the inflation rate during the year is 3%, what is the real rate of return on the bond? Assume annual interest payments.

Answer 2

Question

Chapter 16, Problem 20PS

A

Summary Introduction

To calculate: The value of expected return rate of 30 year bond over the 5 year period.

Introduction: The return rate of the portfolio is defined in terms of the expected gain or loss after the maturity period of portfolio. The positive return means gain in the investment. Negative return shows the loss of the portfolio.

B

Summary Introduction

To calculate: The annual expected return rate of 20 year bond.

Introduction: The return rate is a measurement of the net gain or net loss over a period of time of the portfolio. Return value is a comparison between total incomes with the investment in the portfolio.

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Answer 3

Question

Chapter 16, Problem 20PS

A

Summary Introduction

To calculate: The value of expected return rate of 30 year bond over the 5 year period.

Introduction: The return rate of the portfolio is defined in terms of the expected gain or loss after the maturity period of portfolio. The positive return means gain in the investment. Negative return shows the loss of the portfolio.

B

Summary Introduction

To calculate: The annual expected return rate of 20 year bond.

Introduction: The return rate is a measurement of the net gain or net loss over a period of time of the portfolio. Return value is a comparison between total incomes with the investment in the portfolio.

Expert Solution & Answer

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Check out a sample textbook solution

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Answer 4

Question

Chapter 16, Problem 20PS

A

Summary Introduction

To calculate: The value of expected return rate of 30 year bond over the 5 year period.

Introduction: The return rate of the portfolio is defined in terms of the expected gain or loss after the maturity period of portfolio. The positive return means gain in the investment. Negative return shows the loss of the portfolio.

B

Summary Introduction

To calculate: The annual expected return rate of 20 year bond.

Introduction: The return rate is a measurement of the net gain or net loss over a period of time of the portfolio. Return value is a comparison between total incomes with the investment in the portfolio.

Expert Solution & Answer

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Check out a sample textbook solution

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Answer 5

Chapter 16, Problem 20PS

A

Summary Introduction

To calculate: The value of expected return rate of 30 year bond over the 5 year period.

Introduction: The return rate of the portfolio is defined in terms of the expected gain or loss after the maturity period of portfolio. The positive return means gain in the investment. Negative return shows the loss of the portfolio.

B

Summary Introduction

To calculate: The annual expected return rate of 20 year bond.

Introduction: The return rate is a measurement of the net gain or net loss over a period of time of the portfolio. Return value is a comparison between total incomes with the investment in the portfolio.

Answer 6

Chapter 16, Problem 20PS

A

Summary Introduction

To calculate: The value of expected return rate of 30 year bond over the 5 year period.

Introduction: The return rate of the portfolio is defined in terms of the expected gain or loss after the maturity period of portfolio. The positive return means gain in the investment. Negative return shows the loss of the portfolio.

Answer 7

Chapter 16, Problem 20PS

A

Summary Introduction

To calculate: The value of expected return rate of 30 year bond over the 5 year period.

Introduction: The return rate of the portfolio is defined in terms of the expected gain or loss after the maturity period of portfolio. The positive return means gain in the investment. Negative return shows the loss of the portfolio.

Answer 8

B

Summary Introduction

To calculate: The annual expected return rate of 20 year bond.

Introduction: The return rate is a measurement of the net gain or net loss over a period of time of the portfolio. Return value is a comparison between total incomes with the investment in the portfolio.

Answer 9

B

Summary Introduction

To calculate: The annual expected return rate of 20 year bond.

Introduction: The return rate is a measurement of the net gain or net loss over a period of time of the portfolio. Return value is a comparison between total incomes with the investment in the portfolio.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 16 - Prob. 1PS Ch. 16 - Prob. 2PS Ch. 16 - Prob. 3PS Ch. 16 - Prob. 4PS Ch. 16 - Prob. 5PS Ch. 16 - Prob. 6PS Ch. 16 - Prob. 7PS Ch. 16 - Prob. 8PS Ch. 16 - Prob. 9PS Ch. 16 - Prob. 10PS

Solution Summary: The author calculates the value of the expected return rate of 30 year bond over the 5 year period.

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To calculate: The annual expected return rate of 20 year bond.

Introduction: The return rate is a measurement of the net gain or net loss over a period of time of the portfolio. Return value is a comparison between total incomes with the investment in the portfolio.

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Chapter 16 Solutions

Solution Summary: The author calculates the value of the expected return rate of 30 year bond over the 5 year period.

Concept explainers

Videos

To calculate: The annual expected return rate of 20 year bond. Introduction: The return rate is a measurement of the net gain or net loss over a period of time of the portfolio. Return value is a comparison between total incomes with the investment in the portfolio.

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Chapter 16 Solutions

To calculate: The annual expected return rate of 20 year bond.

Introduction: The return rate is a measurement of the net gain or net loss over a period of time of the portfolio. Return value is a comparison between total incomes with the investment in the portfolio.