Ans 1) Formula for bond price
bond price = coupon * ( 1 - (1 + maturity yield)^-n)/maturity yield + F/(1+maturity yield)^n
where n is maturity
bond price = 600 * (1 - (1.062)^-5)/.062 + 10000/(1.062)^5
= $9916.21
Ans 2) Total return in two years = (Selling price of bond - buying price of bond + coupon payments in two years)
= (10100 - 9916.12 + 2*600)
= $1383.88
Annualized return = (1 + 1383.88/9916.12)^(.5)
= (1.139559)^.5
= 6.75%
33) You purchased a coupon bond on January 2, 2020 with the following information: Coupon rate: 6.00% Interest payment:...
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purchased a coupon bond on January 2, 2020 with the following information: You purchased Coupon rate: 6.00% Interest payment: annual Maturity: 5 years Par Amount: $10,000 Yield to Maturity: 6.20% 33.1 - What price did you pay for this bond? Show all calculations. 33.2 - If you sold the bond exactly two years later at a price of $101, what is your annualized rate of return for the two years, assuming you did not reinvest any coupon payments? You must...
33) You purchased a coupon bond on January 2, 2020 with the following information: Coupon rate: 6.00% Interest payment: annual Maturity: 5 years Par Amount: $10,000 Yield to Maturity: 6.20% 1 – What price did you pay for this bond? Show all calculations. 2 – If you sold the bond exactly two years later at a price of $101, what is your annualized rate of return for the two years, assuming you did not reinvest any coupon payments? You must...
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