Suppose a security pays $100 in 3 months, and is currently trading at $96.55. What is...

Question

Question

Suppose a security pays $100 in 3 months, and is currently trading at $96.55. What is the effective annual rate on this security?

Round your answer to 4 decimal places. For example if your answer is 3.205%, then please write down 0.0321.

Answer 1

Answer #1

Return = [FV - PV] / PV = [$100 - $96.55] / $96.55 = $3.45 / $96.55 = 0.0357

EAR = [1 + [APR / n]]^{T x n} - 1 = [1 + [0.0357 / 4]]⁴ - 1 = 1.0362 - 1 = 0.0362

Answer 2

Similar Homework Help Questions

Suppose a security pays $100 in 6 months, and is currently trading at $96.99. What is...

Suppose a security pays $100 in 6 months, and is currently trading at $96.99. What is the annual percentage rate on this security? Round your answer to 4 decimal places. For example if your answer is 3.205%, then please write down 0.0321.
Consider a 11-year, 6% annual coupon $1000 par bond currently trading at par. Suppose that the...

Consider a 11-year, 6% annual coupon $1000 par bond currently trading at par. Suppose that the bond is callable in 2 years at 102% par. What is the bond's yield to call? Assume annual compounding. Round your answer to 4 decimal places. For example if your answer is 3.205%, then please write down 0.0321
You lend $110 today and receive a promise for repayment 10 years from now of $237....

You lend $110 today and receive a promise for repayment 10 years from now of $237. What is implied effective annual interest rate? Round your answer to 4 decimal places. For example if your answer is 3.205%, then please write down 0.0321.

A stock has returns -2.2%, 7.8%, -9.9%, and 7.1% in each of the past 4 months....

A stock has returns -2.2%, 7.8%, -9.9%, and 7.1% in each of the past 4 months. What is the stock's mean return from those 4 observations only? Round your answer to 4 decimal places. For example if your answer is 3.205%, then please write down 0.0321.
What is the current yield for a 12-year 8% coupon bond with a par value of...

What is the current yield for a 12-year 8% coupon bond with a par value of $1,000 that is selling for $928.27? Round your answer to 4 decimal places. For example if your answer is 3.205%, then please write down 0.0321.
Suppose that you have found the optimal risky combination using all risky assets available in the...

Suppose that you have found the optimal risky combination using all risky assets available in the economy, and that this optimal risky portfolio has an expected return of 0.1 and standard deviation of 0.2. The T-bill rate is 0.05. If your risk-return preferences are best described by the utility function in this class, with a risk-aversion coefficient of 5.2. What is the expected return on your optimal complete portfolio? Round your answer to 4 decimal places. For example if your...

Use the following table to answer the question below. Expected ret. std. dev. S&P500 13% 25%...

Use the following table to answer the question below. Expected ret. std. dev. S&P500 13% 25% ABC Fund 16% 27% T-bill 4% Borrow 6% What is the highest fee that a client who is currently borrowing would be willing to pay to invest in your fund instead of S&P500? Round your answer to 4 decimal places. For example, if your answer is 3.205%, then please write down 0.0321.
A client has a 9.7-year investment horizon. Construct a portfolio with the following two bonds for this investor to hel...

A client has a 9.7-year investment horizon. Construct a portfolio with the following two bonds for this investor to help protect against interest rate risk. What is the weight to put on bond B in this portfolio? Macaulay duration 6.0 Bond A Bond B 13.3 Round your answer to 4 decimal places. For example if your answer is 3.205%, then please write down 0.0321.
Consider a 11-year, 6% annual coupon $1000 par bond currently trading at par. Suppose that the bond is callable in 2 yea...

Consider a 11-year, 6% annual coupon $1000 par bond currently trading at par. Suppose that the bond is callable in 2 years at 102% par. What is the bond's yield to call? Assume annual compounding. Round your answer to 4 decimal places.

A bond with 7 years left to maturity is trading for $967. It pays coupons semiannually....

A bond with 7 years left to maturity is trading for $967. It pays coupons semiannually. Its YTM is currently 3.6%. The coupon rate for this bond must be ________%. Do not round any intermediate work. Round your *final* answer to 2 decimal places (example: .1234567 = 12.35). Do not enter the % sign. Margin of error for correct responses: +/- .03%.