Question

P10.9 (similar to) Question Help Assume that you pay $741.04 for a long-term bond that carries a coupon of 6.8%. Over the course of the next 12 months, interest rates drop sharply. As a result, you sell the bond at a price of $854.96. a. Find the current yield that existed on this bond at the beginning of the year. What was it by the end of the one-year holding period? b. Determine the holding period return on this investment. (Hint: See Chapter 5 for the HPR formula.) a. The current yield that existed on this bond at the beginning of the year is % (Round to two decimal places.) Enter your answer in the answer box and then click Check parts 2 remaining

Answer 1

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- 2x NDERERA Σ AutoSum : A Fill Z Sort & Styles 2 Clear Filter Editing Find & Select Cells BOND - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View Add-Ins % Cut Calibri -11AA = = = Dr Wrap Text General Ea Copy Paste Format Painter BI U D- DA Merge & Center - $ % , :.: Formatting as Table Clipboard Font Alignment Number Styles K638 - Fax I J K L M 619 620 621 741.04 622 854.96 623 C1 1000 X 6.8% 68 624 625 1 AT THE BEGINNING OF THE YEAR 626 CURRENT YIELD = COUPON/PO CURRENT YIELD = 68/741.04 CURRENT YIELD = 9.18% 627 628 629 630 631 632 2 AT THE END OF THE YEAR CURRENT YIELD = CURRENT YIELD = CURRENT YIELD = COUPON/P1 68/854.96 7.95% 633 3 HOLDING PERIOD RETURN = 24.55% [(P1+C1-PO)/PO] 634 635 636 637 638 620 K Rea Sheet2 AFN BANKING NOTE 51 53 CLEAN PRICE S10 BIDDING, UNDERWRITING EUAC AW LIFELP, IP, MRP, INFLATION WARRANT refund 0 0 YIELD SPOT 1 ferences S4 S5 S6 BOI 120% DE * ENG 08:23 04-11-2019