19. Face Value = $100000
Coupon Rate = 8%
Tenure =7 years
Price = $105500
Coupon Payment = 0.08*100000 = $8000
Now using annuity formula
105500 = (8000/YTM)[1-(1/(1+YTM)7)] + 100000/(1+YTM)7
using value 5.5%
Left side value = (8000/0.055)[1-(1/(1.055)7)] + 100000/(1.055)7 = $114207.41
using value 6.7%
Left side value = (8000/0.067)[1-(1/(1.067)7)] + 100000/(1.067)7 = $107079.95
using value 7%
Left side value = (8000/0.07)[1-(1/(1.07)7)] + 100000/(1.07)7 = $105389.28
at 7% , the Left side is closest to Right side
answer is C
19. Today (T=0), an investor purchased a seven year bond with an 8.0% coupon for $105,500....
A. Today (T=0), an investor purchased a seven year bond with an 8.0% coupon for $105,500. The bond has a face value of $100,000. The bond’s yield to maturity is closest to: 5.5% 6.7% 7.0% 8.0% 11.0 % B. Today (T=0), an investor purchased a nine year bond with an 8.0% coupon for $9,680. The bond has a face value of $10,000. In six months (T=0.5) interest rates have increased by 1.0% and the investor decides to sell the bond...
18. Today (T=0), an investor purchased a five year bond with an 8.0% coupon at par. Assume interest rates do not change from now until the bond's maturity. If the investor holds the bond from now until maturity and can reinvest coupons at the YTM, the investor's rate of return will be closest to: A. 4.0 % B. 6.7 % C. 7.0 % D. 8.0 % E. 9.7 % 19. Today (T=0), an investor purchased a seven year bond with...
Today (T=0), an investor purchased a nine year bond with an 8.0% coupon for $9,680. The bond has a face value of $10,000. In six months (T=0.5) interest rates have increased by 1.0% and the investor decides to sell the bond immediately after receiving the first coupon payment. What is the investor’s total gain (loss) on the bond? HINT: Total Gain (Loss) = Price Change in Bond + Coupon A. ($583) B. ($183) C. ($150) D. $190 E. $990
Today (T=0), an investor purchased a nine year bond with an 8.0% coupon for $9,680. The bond has a face value of $10,000. In six months (T=0.5) interest rates have increased by 1.0% and the investor decides to sell the bond immediately after receiving the first coupon payment. What is the investor’s total gain (loss) on the bond? HINT: Total Gain (Loss) = Price Change in Bond + Coupon A. ($583) B. ($183) C. ($150) D. $190 E. $990
Today (T=0), an investor purchased a nine year bond with an 8.0% coupon for $9,680. The bond has a face value of $10,000. In six months (T=0.5) interest rates have increased by 1.0% and the investor decides to sell the bond immediately after receiving the first coupon payment. What is the investor’s total gain (loss) on the bond? HINT: Total Gain (Loss) = Price Change in Bond + Coupon
Several links were posted to D2L and included。n the bond lecture slides which of the statements (I-IV) is (are) most likely FALSE I. When sh orter maturity treasuries are yielding less than longe r maturity treasuries, the yield curve is Il. When shorter maturity treasuries start to yield more than longer maturity treasuries, the bond market ls Il. When shorter maturity treasuries are yielding more than longer maturity treasuries, it would be a good V. If investors are confident that...
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Today (T=0), an investor purchased a five year bond with an 8.0% coupon at par. Assume interest rates do not change from now until the bond’s maturity. If the investor holds the bond from now until maturity, the investor’s rate of return will be closest to: A. 4.0% B. 6.7% C. 7.0% D. 8.0% E. 9.7%
Today (T=0), an investor purchased a five year bond with an 8.0% coupon at par. Assume interest rates do not change from now until the bond’s maturity. If the investor holds the bond from now until maturity, the investor’s rate of return will be closest to
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