An investor purchased a 10 year zero coupon bond with 10% ytm. The interest rate for...
An investor purchased a 10 year zero coupon bond with 10% ytm. The interest rate for the bond increased by 1% right after he purchased the bond. What will be the investors realized rate of return if he holds the bond to maturity?
Homework Answers
Realized rate of return if the bond is held till maturity=ytm at the time of purchase=10%
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An investor purchased a 10 year zero coupon bond with 10% ytm. The interest rate for...
An-investor initially purchases a 5-year, 6% annual coupon payment bond at par value of $100. Assume...
An-investor initially purchases a 5-year, 6% annual coupon payment bond at par value of $100. Assume the interest rates go up by 1% right after the first coupon is received and then go down by 2% right after the fourth coupon is received. Assume the term structure is flat and coupon payments are reinvested in zero-coupon bonds that mature at the end of investment horizon. a) What is investor's realized rate of return if he holds the bond until maturity?...
INTEREST RATE SENSITIVITY An investor purchased the following 5 bonds. Each bond had a par value...
INTEREST RATE SENSITIVITY An investor purchased the following 5 bonds. Each bond had a par value of $1,000 and an 10% yield to maturity on the purchase day. Immediately after the investor purchased them, interest rates fell, and each then had a new YTM of 5%. What is the percentage change in price for each bond after the decline in interest rates? Fill in the following table. Round your answers to the nearest cent or to two decimal places. Enter...
"If the investment horizon is equal to the Macaulay duration of the bond, the investor is...
"If the investment horizon is equal to the Macaulay duration of the bond, the investor is hedged against interest rate risk". However, the above statement is only true if interest rates only change before fist coupon payment is received. Using the following bond to show that if interest rate increases 2% between first and second coupon payment dates, the investor is not hedged against interest rate risk even if his duration gap is zero.: A four-year 33.7% annual coupon paying...
Q. consider the following $1,000 par value zero-coupon bonds: Bond Years to Maturity YTM A 1...
Q. consider the following $1,000 par value zero-coupon bonds: Bond Years to Maturity YTM A 1 3% B 2 4% C 3 5% D 4 6% a. What is the expected 1-year interest rate in the 3rd year? b. What will be the price of the 2-year zero-coupon bond after 2 years? c. Suppose, next year, you consider buying 3-year zero-coupon bond and holding it for 2 years. What will be the realized compound return?
INTEREST RATE SENSITIVITY An investor purchased the following 5 bonds. Each bond had a par value...
INTEREST RATE SENSITIVITY An investor purchased the following 5 bonds. Each bond had a par value of $1,000 and an 10% yield to maturity on the purchase day. Immediately after the investor purchased them, interest rates fell, and each then had a new YTM of 7%. What is the percentage change in price for each bond after the decline in interest rates? Fill in the following table. Round your answers to the nearest cent or to two decimal places. Enter...
INTEREST RATE SENSITIVITY An investor purchased the following 5 bonds. Each bond had a par value...
INTEREST RATE SENSITIVITY An investor purchased the following 5 bonds. Each bond had a par value of $1,000 and an 10% yield to maturity on the purchase day. Immediately after the investor purchased them interest rates fell and each then had a new YTM of 7%, what is the percentage change in price for each bond after the decline in interest rates? Fill in the following table. Round your answers to the nearest cent or to two decimal places. Enter...
Today (T=0), an investor purchased a five year bond with an 8.0% coupon at par. Assume...
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
Zero-coupon bonds: a. A ten-year, zero coupon bond trades at a Yield-to-Maturity (YTM) of 3.5%. Assume...
Zero-coupon bonds: a. A ten-year, zero coupon bond trades at a Yield-to-Maturity (YTM) of 3.5%. Assume you buy $1000 worth of the bond today. How much will it be worth 10 years from now at maturity? b. A 5-year, zero coupon bond trades at a Yield-to-Maturity (YTM) of 2.5%. Assume you buy $1000 worth of the bond today. How much will it be worth 5 years from now at maturity? C. Assume you invest $1,131.41 today and receive $1,410.60 five...
18. Today (T=0), an investor purchased a five year bond with an 8.0% coupon at par....
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 five year bond with an 8.0% coupon at par. Assume...
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%
INTEREST RATE SENSITIVITY An investor purchased the following 5 bonds. Each bond had a par value of $1,000 and an 10% yield to maturity on the purchase day. Immediately after the investor purchased them, interest rates fell, and each then had a new YTM of 5%. What is the percentage change in price for each bond after the decline in interest rates? Fill in the following table. Round your answers to the nearest cent or to two decimal places. Enter...
INTEREST RATE SENSITIVITY An investor purchased the following 5 bonds. Each bond had a par value of $1,000 and an 10% yield to maturity on the purchase day. Immediately after the investor purchased them interest rates fell and each then had a new YTM of 7%, what is the percentage change in price for each bond after the decline in interest rates? Fill in the following table. Round your answers to the nearest cent or to two decimal places. Enter...
Zero-coupon bonds: a. A ten-year, zero coupon bond trades at a Yield-to-Maturity (YTM) of 3.5%. Assume you buy $1000 worth of the bond today. How much will it be worth 10 years from now at maturity? b. A 5-year, zero coupon bond trades at a Yield-to-Maturity (YTM) of 2.5%. Assume you buy $1000 worth of the bond today. How much will it be worth 5 years from now at maturity? C. Assume you invest $1,131.41 today and receive $1,410.60 five...
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...
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