19. You purchase a 5-year and 10%-coupon rate bond with face amount of $1,000 at par value. One year later, market interest rate increases from 10% to 20%, what is the rate of capital gain for the bond?
(A) -40.3%.
(B) -29.5%.
(C) -25.9%.
(D) -30.3%.
(E) -15.9%
20.Refer to Q19, what is the rate of return for the bond?
(A) -40.3%.
(B) -38.4%.
(C) -25.9%.
(D) -30.3%.
(E) -15.9%.
19] | Price of the bond one year later = 1000/1.2^4+100*(1.2^4-1)/(0.2*1.2^4) = | $ 741.13 |
Rate of capital gain = 741.13/1000-1 = | -25.9% | |
Answer: Option [C] | ||
20] | Rate of return for the bond = (100+741.13-1000)/1000 = | -15.9% |
Answer: Option [E] |
19. You purchase a 5-year and 10%-coupon rate bond with face amount of $1,000 at par value. One year later, market inter...
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