Question

Question 2 1/2 pts Suppose you purchase a 3-year, 5-percent coupon bond at par and held it for two years. During that time, the interest rate falls to 4%. Calculate your ANNUAL holding period return.

Answer 1

Function Arguments ? x PV Rate Nper Pmt 50 Fv 1000 Type o 1 1 1 1 = 0.04 = 1 = 50 = 1000 = -1009.615385 Returns the present value of an investment: the total amount that a series of future payments is worth now. Type is a logical value: payment at the beginning of the period = 1; payment at the end of the period = 0 or omitted. Formula result = $1,009.62 Help on this function L OK Cancel

Bond sale price is $1,009.62

Function Arguments ? x RATE Nper Pmt 50 Pv -1000 FV 1009.62 Type o 1 1 1 1 1 = 2 = 50 = -1000 = 1009.62 = 0 = 0.05468199 Returns the interest rate per period of a loan or an investment. For example, use 6%/4 for quarterly payments at 6% APR. Type is a logical value: payment at the beginning of the period = 1; payment at the end of the period = 0 or omitted. Formula result = 5.47% Help on this function ок 1 Cancel

Hence, Annual holding period return is is 5.47%

*Please rate thumbs up