Question

* 0133020312 * FIN 432 - Inv * C A long-term * Q Finance Chap x G Assume a pu * Get Homewe. webapps/assessment/take/launchjsp?course_assessment_id=_17709_1&course_id=_25356_1&content_ide_431107_1&step=null If the coupon rate on the bond is 8% today, and inflation is 3% per year what is the coupon rate on the bond in 3 years? + 2.8.74% b.8% C.5% QUESTION 13 2.22 points Save Answer Assume a par of $1,000, and a coupon rate of 5.3%. If the coupon payment is made semiannually, the amount paid every six months to the bondholder is 8.553 ob $106 $26.50 QUESTION 14 2.22 points Save Answer If the semiannual yield to maturity on a bond is 2 25%, the annual yield to maturity is 8.45% ob 2 25% 6.9% Click Save and Submit to save and submit. Click Save All Answers to save all answers. Save Al Answers Save and Submit A 0 11/2/2009

Answer 1

Coupon rate after 3 Yeasr = Coupon rate*(1+r)^3

r is inflation Rate

Coupon rate after 3 Yeasr = Coupon rate * (1+r)^3

= 8% * (1.03^3)

= 8% * 1.02927

= 8.74%

Part B:

SemiAnnual Coupon AMount = Face Value * Coupon Rate / 2

= $ 1000 * 5.3% / 2

= $ 26.5

Part C:

Annual YTM = Semi Annual YTM * 2

= 2.25% * 2

= 4.5%