Consider these long-term investment data: • The price of a 10-year $100 par zero coupon inflation-indexed...
Consider these long-term investment data:
• The price of a 10-year $100 par zero coupon inflation-indexed bond is $80.55.
• A real-estate property is expected to yield 2% per quarter (nominal) with a SD of the (effective) quarterly rate of 10%.
Compute the annual rate on the real bond
Homework Answers
Add Answer to:
Consider these long-term investment data:
• The price of a 10-year $100 par zero coupon inflation-indexed...
Problem 6-23 Real Returns (LO3) Suppose that you buy a TIPS (inflation-indexed) bond with a 1-year...
Problem 6-23 Real Returns (LO3) Suppose that you buy a TIPS (inflation-indexed) bond with a 1-year maturity and a coupon of 3% paid annually. Assume you buy the bond at its face value of $1,000, and the inflation rate is 6% a. What will be your cash flow at the end of the year? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Cash flow b. What will be your real return? Real return c. What will...
6 Suppose you purchase a 3-year, 5-percent coupon bond at par and hold it for two...
6
Suppose you purchase a 3-year, 5-percent coupon bond at par and hold it for two years. During that time, the interest rate falls to 4 percent. Calculate your annual holding period return. Instructions: Enter your response rounded to two decimal places Holding period return A 10-year zero-coupon bond has a yield of 6 percent. Through a series of unfortunate circumstances, expected inflation rises from 2 percent to 3 percent. The face value of the bond is $100 a. Assuming...
a) The price of a 4-year zero coupon government bond is 79.81. What is the yield...
a) The price of a 4-year zero coupon government bond is 79.81. What is the yield to maturity (effective annual yield) on the 4-year bond? b) The price of a 3-year zero coupon government bond is 85.16. What is the yield to maturity (effective annual yield) on the 3-year bond? The prices of 1, 2, 3, and 4-year zero coupon government bonds are 95.42, 90.36, 85.16, and 79.81, respectively. What is the implied 2-year forward rate between years 2 and...
Question 11: a) The price of a 4-year zero coupon government bond is 79.81. What is...
Question 11: a) The price of a 4-year zero coupon government bond is 79.81. What is the yield to maturity (effective annual yield) on the 4-year bond? b) The price of a 3-year zero coupon government bond is 85.16. What is the yield to maturity (effective annual yield) on the 3-year bond? c) The prices of 1, 2, 3, and 4-year zero coupon government bonds are 95.42, 90.36, 85.16, and 79.81, respectively. What is the implied 2-year forward rate between...
(8 points) Consider two coupon-bonds, one is a 3-year $100 par-valued bond with 5% annual coupon...
(8 points) Consider two coupon-bonds, one is a 3-year $100 par-valued bond with 5% annual coupon payment and annual yield rate 4%; the other is a 3-year $100 par-valued bond with 5% annual coupon payment and annual yield rate 6%. Which one do you think is a better investment and why?
10. A 10-year zero-coupon bond has a yield of 6 percent. Through a series of unfortunate circumstances, expected inflat...
10. A 10-year zero-coupon bond has a yield of 6 percent. Through a series of unfortunate circumstances, expected inflation rises from 2 percent to 3 percent. (L04) a. Assuming the nominal yield rises by an amount equal to the rise in expected inflation, compute the change in the price of the bond. b. Suppose that expected inflation is still 2 percent, but the probability that it will move to 3 percent has risen. Describe the consequences for the price of...
18. Bill buys a 10-year 1000 par value 6% bond with semi-annual coupons. The price assumes...
18. Bill buys a 10-year 1000 par value 6% bond with semi-annual coupons. The price assumes a nominal yield of 6%, compounded semi-annually. As Bill receives each coupon payment, he immediately puts the money into an account earning interest at an annual effective rate of i. At the end of 10 years, immediately after Bill receives the final coupon payment and the redemption value of the bond, Bill has earned an annual effective yield of 7% on his investment in...
A zero coupon bond of term 3 years has a continuously compounding yield of 5.85%. A zero coupon bond of term 5 years has a continuously compounding yield of 8.95%. Use Excel to compute the two year quarterly compounding rate 3 years forward.
A zero coupon bond of term 3 years has a continuously compounding yield of 5.85%. A zero coupon bond of term 5 years has a continuously compounding yield of 8.95%.Use Excel to compute the two year quarterly compounding rate 3 years forward.
A zero coupon bond has a face value of $1,000 and matures in 6 years. Investors...
A zero coupon bond has a face value of $1,000 and matures in 6 years. Investors require a(n) 7.2 % annual return on these bonds. What should be the selling price of the bond? If the nominal rate of interest is 12.21 % and the real rate of interest is 8.76 % what is the expected rate of inflation? A Ford Motor Co. coupon bond has a coupon rate of 6.75%, and pays annual coupons. The next coupon is due...
A 10-year maturity bond with par value of $1,000 makes semiannual coupon payments at a coupon...
A 10-year maturity bond with par value of $1,000 makes semiannual coupon payments at a coupon rate of 7%. Find the bond equivalent and effective annual yield to maturity of the bond for the following bond prices. (Round your answers to 2 decimal places.) Bond Prices Bond Equivalent Annual Yield to Maturity Effective Annual Yield to Maturity a. b. c. $ $ $ 940 1,000 1,040
Problem 6-23 Real Returns (LO3) Suppose that you buy a TIPS (inflation-indexed) bond with a 1-year maturity and a coupon of 3% paid annually. Assume you buy the bond at its face value of $1,000, and the inflation rate is 6% a. What will be your cash flow at the end of the year? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Cash flow b. What will be your real return? Real return c. What will...
6
Suppose you purchase a 3-year, 5-percent coupon bond at par and hold it for two years. During that time, the interest rate falls to 4 percent. Calculate your annual holding period return. Instructions: Enter your response rounded to two decimal places Holding period return A 10-year zero-coupon bond has a yield of 6 percent. Through a series of unfortunate circumstances, expected inflation rises from 2 percent to 3 percent. The face value of the bond is $100 a. Assuming...
a) The price of a 4-year zero coupon government bond is 79.81. What is the yield to maturity (effective annual yield) on the 4-year bond? b) The price of a 3-year zero coupon government bond is 85.16. What is the yield to maturity (effective annual yield) on the 3-year bond? The prices of 1, 2, 3, and 4-year zero coupon government bonds are 95.42, 90.36, 85.16, and 79.81, respectively. What is the implied 2-year forward rate between years 2 and...
Question 11: a) The price of a 4-year zero coupon government bond is 79.81. What is the yield to maturity (effective annual yield) on the 4-year bond? b) The price of a 3-year zero coupon government bond is 85.16. What is the yield to maturity (effective annual yield) on the 3-year bond? c) The prices of 1, 2, 3, and 4-year zero coupon government bonds are 95.42, 90.36, 85.16, and 79.81, respectively. What is the implied 2-year forward rate between...
(8 points) Consider two coupon-bonds, one is a 3-year $100 par-valued bond with 5% annual coupon payment and annual yield rate 4%; the other is a 3-year $100 par-valued bond with 5% annual coupon payment and annual yield rate 6%. Which one do you think is a better investment and why?
10. A 10-year zero-coupon bond has a yield of 6 percent. Through a series of unfortunate circumstances, expected inflation rises from 2 percent to 3 percent. (L04) a. Assuming the nominal yield rises by an amount equal to the rise in expected inflation, compute the change in the price of the bond. b. Suppose that expected inflation is still 2 percent, but the probability that it will move to 3 percent has risen. Describe the consequences for the price of...
18. Bill buys a 10-year 1000 par value 6% bond with semi-annual coupons. The price assumes a nominal yield of 6%, compounded semi-annually. As Bill receives each coupon payment, he immediately puts the money into an account earning interest at an annual effective rate of i. At the end of 10 years, immediately after Bill receives the final coupon payment and the redemption value of the bond, Bill has earned an annual effective yield of 7% on his investment in...
A 10-year maturity bond with par value of $1,000 makes semiannual coupon payments at a coupon rate of 7%. Find the bond equivalent and effective annual yield to maturity of the bond for the following bond prices. (Round your answers to 2 decimal places.) Bond Prices Bond Equivalent Annual Yield to Maturity Effective Annual Yield to Maturity a. b. c. $ $ $ 940 1,000 1,040
Most questions answered within 3 hours.
-
The table below represents the number of republicans, democrats
and independent voting on a specific issue....
asked 1 minute ago -
List and compare different forms of passive transport and active
transport.
asked 9 minutes ago -
In Netherland Dwarf rabbits, dwarf size is determined by allele
N, and normal-size by allele n....
asked 15 minutes ago -
During Heaton Company’s first two years of operations, it
reported absorption costing net operating income as...
asked 30 minutes ago -
Consider testing the
hypotheses:
H0: p = 0.56
H1: p > 0.56
where p is
the...
asked 33 minutes ago -
In a two-factor analysis of variance a main effect is defined as
____.
a. the unique...
asked 40 minutes ago -
A bank's loan officer rates applicants for credit. The ratings
are normally distributed with a mean...
asked 41 minutes ago -
Fill in the following information for Adipic Acid: molecular
weight, g or ml, mole, melting point,...
asked 46 minutes ago -
how
to use a for loop to iterate over the string below and print each
character...
asked 48 minutes ago -
Please type answer, Thanks.
Respond to the following in a minimum of 175
words:
Research industry...
asked 48 minutes ago -
Assume that all interest rates in the economy increase from 9
percent to 10 percent. Which...
asked 58 minutes ago -
Describe the function of a Change Control Board.
When calculating Planned Value (PV), what is the...
asked 1 hour ago