Question

Lab 5 Saved Help Save & Exit Check 3 10 points On February 2, 2016, an investor held some Province of Ontario stripped coupons in a self-administered RRSP at ScotiaMcLeod, an investment dealer. Each coupon represented a promise to pay $100 at the maturity date on February 2.2022, but the investor would receive nothing until then. The value of the coupon showed as $82.09 on the investor's screen. This means that the investor was giving up $8209 on February 2, 2016 in exchange for $100 to be received just less than six years later. 6. Based upon the $82.09 price, what rate was the yield on the Province of Ontario bond? (Do not round intermediate calculations and round your final answer to 2 decimal places.) 00:4150 Rate of return b. Suppose that on February 2, 2017 the security's price was $9100 If an investor had purchased it for $8209 a year earlier and sold it on this day, what annual rate of return would she have ened? (Do not round intermediate calculations and round your final answer to 2 decimal places.) Annual rate of return c. If an investor had purchased the security at the market price of 59100 on February 2, 2017 and held it until it matured, what annual rate of retum would she have earned? Do not round intermediate calculations and round your final answer to 2 decimal places) Annual rate of retum

Answer 1

of 97:11 ELI LIOZOZ (Amt in $) Rate of Yield to Maturity Interest + (Maturity - Purchase rate Value No of years at Maturity xloo Malucily Valke Annual rate return Current Value Purchase Value x 100 Puchare Value Value $82.09 x 100 $ 82:04 + Purchase Value $ 10.852 2 ([[[[[[UN 100 82:09 6 100 + 82.09 xwo Troof year Annuclined rate of return Ga Matusil, Value of bond Begginning Value of bond Ys $100 2 2.985 91.045 x100 = Malwindy Value xoo 3.282 Rate of Returns Purchase Valud Purchase Value 82.09 xloo 82.09 = 21.82% [Note :- Due to lack of clarity in questions both yield to maturity & rate of return is calculated (1.09890 O 01904 0·01904 X 100 1:9042 W