Today (T=0), an investor purchased a five year bond with an 8.0% coupon at par. Assume...

Question

Question

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%

business finance

Add a comment Improve this question Transcribed image text

Answer 1

Answer #1

Since the bond sells at par value and interest rate doesnt cange. coupon rate wil「be equal to interest rate of 8%. So investo

Add a comment

Answer 2

Similar Homework Help Questions

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
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...
A. Today (T=0), an investor purchased a seven year bond with an 8.0% coupon for $105,500....

A. Today (T=0), an investor purchased a seven year bond with an 8.0% coupon for $105,500. The bond has a face value of $100,000. The bond’s yield to maturity is closest to: 5.5% 6.7% 7.0% 8.0% 11.0 % B. Today (T=0), an investor purchased a nine year bond with an 8.0% coupon for $9,680. The bond has a face value of $10,000. In six months (T=0.5) interest rates have increased by 1.0% and the investor decides to sell the bond...

19. Today (T=0), an investor purchased a seven year bond with an 8.0% coupon for $105,500....

19. Today (T=0), an investor purchased a seven year bond with an 8.0% coupon for $105,500. The bond has a face value of $100,000. The bond's yield to maturity is closest to: A. 5.5 % B. 6.7 % C. 7.0 % D. 8.0 % E. 11.0% 20. Today (T=0), an investor purchased a nine year bond with an 8.0% coupon for $9,680. The bond has a face value of $10,000. In six months (T=0.5) interest rates have increased by 1.0%...
Today (T=0), an investor purchased a nine year bond with an 8.0% coupon for $9,680. The...

Today (T=0), an investor purchased a nine year bond with an 8.0% coupon for $9,680. The bond has a face value of $10,000. In six months (T=0.5) interest rates have increased by 1.0% and the investor decides to sell the bond immediately after receiving the first coupon payment. What is the investor’s total gain (loss) on the bond? HINT: Total Gain (Loss) = Price Change in Bond + Coupon
Today (T=0), an investor purchased a nine year bond with an 8.0% coupon for $9,680. The...

Today (T=0), an investor purchased a nine year bond with an 8.0% coupon for $9,680. The bond has a face value of $10,000. In six months (T=0.5) interest rates have increased by 1.0% and the investor decides to sell the bond immediately after receiving the first coupon payment. What is the investor’s total gain (loss) on the bond? HINT: Total Gain (Loss) = Price Change in Bond + Coupon A. ($583) B. ($183) C. ($150) D. $190 E. $990

Today (T=0), an investor purchased a nine year bond with an 8.0% coupon for $9,680. The...

Today (T=0), an investor purchased a nine year bond with an 8.0% coupon for $9,680. The bond has a face value of $10,000. In six months (T=0.5) interest rates have increased by 1.0% and the investor decides to sell the bond immediately after receiving the first coupon payment. What is the investor’s total gain (loss) on the bond? HINT: Total Gain (Loss) = Price Change in Bond + Coupon A. ($583) B. ($183) C. ($150) D. $190 E. $990
Today (T=0), an investor purchased a 20 year bond with a 5.00% coupon and a face...

Today (T=0), an investor purchased a 20 year bond with a 5.00% coupon and a face value of $100,000 for $106,550. In six months (T=0.5) interest rates have decreased by 0.50% and the investor decides to sell the bond immediately after receiving the first coupon payment. What is the investor’s total gain (loss) on the bond? HINT: Total Gain (Loss) = Price Change in Bond + Coupon
25. Today (T=0), an investor purchased a 20 year bond with a 5.00% coupon and a...

25. Today (T=0), an investor purchased a 20 year bond with a 5.00% coupon and a face value of $100,000 for $106,550. In six months (T=0.5) interest rates have decreased by 0.50% and the investor decides to sell the bond immediately after receiving the first coupon payment. What is the investor’s total gain (loss) on the bond? HINT: Total Gain (Loss) = Price Change in Bond + Coupon ($6,548) ($6,048) $7,130 $7,602 $7,630

25. Today (T=0), an investor purchased a 20 year bond with a 5.00% coupon and a...

25. Today (T=0), an investor purchased a 20 year bond with a 5.00% coupon and a face value of $100,000 for $106,550. In six months (T=0.5) interest rates have decreased by 0.50% and the investor decides to sell the bond immediately after receiving the first coupon payment. What is the investor’s total gain (loss) on the bond? HINT: Total Gain (Loss) = Price Change in Bond + Coupon A. ($6,548) B. ($6,048) C. $7,130 D. $7,602 E. $7,630

Today (T=0), an investor purchased a five year bond with an 8.0% coupon at par. Assume...

Homework Answers