Question

Homework: Chapter 7 Homework Save HW Score: 0%,0 of 17 pts Score: 0 of 2 pts 2 of 7 (0 complete) Problem 7-5 (similar to) Question Help (Bond valuation) At the beginning of the year, you bought a $1,000 par value corporate bond with an annual coupon rate of 15 percent and a maturity date of 12 years. When you bought the bond, it had an expected yield to maturity of 11 percent. Today the bond sells for $1,430. a. What did you pay for the bond? b. If you sold the bond at the end of the year, what would be your one-period return on the investment? Assume that you did not receive any interest payment during the holding period a. The price you paid for the bond is $ (Round to the nearest cent.)

Answer 1

a)Amount paid for the bond at the time of purchase:-

=PV(rate,nper,pmt,fv)

=PV(11%,12,15%*1000,1000)

=1259.69

b) One-period return:-

=1430/1259.69-1

=13.52%