Assume that you purchase a 30-year $1,000 par value bond, with a 12% coupon, and a yield of 9%. Immediately after you purchase the bond, yields change to 8% and remain at that level to maturity. Assume that you hold the bond for 6 years and then sell it. Interest is paid annually. PART A: What is the price of the bond today? PART B: What is the price of the bond after 7 years? Part C: Now, calculate the realized horizon yield for this bond if you hold it for 7 years and then sell it.
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Assume that you purchase a 30-year $1,000 par
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- USE THE FOLLOWING INFORMATION FOR THE NEXT 3 QUESTIONS: Part 1 of 3: Assume that you purchase a 30-year $1,000 par value bond, with a 10% coupon, and a yield of 9%. Immediately after you purchase the bond, yields change to 7% and remain at that level to maturity. Assume that you hold the bond for 8 years and then sell it. Interest is paid annually. What is the price of the bond today? Group of answer choices A. $1,991.87 B. $1,538.14 C. $1.732.51 D. $1,102.74 E. $1,225.16Suppose you purchase a 10-year bond with 6.19% annual coupons. You hold the bond for 4 years, and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 5.34% when you purchased and sold the bond, a. what cash flows will you pay and receive from your investment in the bond per $100 face value? b. what is the annual rate of return of your investment? a. What cash flows will you pay and receive from your investment in the bond per $100 face value? The cash flows from the investment are shown in the following timeline: (Round to the best choice below.) A. Years 2 3 Cash Flows $106.46 $6.19 $6.19 $6.19 $110.46 B. Years 0 2 3 4 Cash Flows - $106.46 $6.19 $6.19 $6.19 $110.46 C. Years 0 1 2 3 4 Cash Flows $104.27 $6.19 $6.19 $6.19 $110.46 D. Years 0 2 3 4 + $6.19 $6.19 $6.19 $104.27 Cash Flows - $110.46 b. What is the annual rate of return of your investment? The annual rate of return of your investment is %. (Round to two decimal places.)Suppose you purchase a 10-year bond with 6.19% annual coupons. You hold the bond for 4 years, and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 5.34% when you purchased and sold the bond, a. what cash flows will you pay and receive from your investment in the bond per $100 face value? b. what is the annual rate of return of your investment? a. What cash flows will you pay and receive from your investment in the bond per $100 face value? The cash flows from the investment are shown in the following timeline: (Round to the best choice below.) A. Years 0 2 3 4 Cash Flows $106.46 $6.19 $6.19 $6.19 $110.46 B. Years 0 2 3 4 Cash Flows - $106.46 $6.19 $6.19 $6.19 $110.46 ○ C. Years 0 2 3 4 Cash Flows $104.27 $6.19 $6.19 $6.19 $110.46 D. Years 0 2 3 4 Cash Flows - $110.46 $6.19 $6.19 $6.19 $104.27 b. What is the annual rate of return of your investment? The annual rate of return of your investment is %. (Round to two decimal places.)
- Suppose you purchase a 10-year bond with 6.64% annual coupons. You hold the bond for 4 years, and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 5.17% when you purchased and sold the bond, a. what cash flows will you pay and receive from your investment in the bond per $100 face value? b. what is the annual rate of return of your investment? a. What cash flows will you pay and receive from your investment in the bond per $100 face value? The cash flows from the investment are shown in the following timeline: (Round to the best choice below.) OA. Years Cash Flows O B. Years C. Years Cash Flows Cash Flows - $114.06 O D. Years 0 Cash Flows $107.42 0 0 - $111.26 0 $111.26 1 $6.64 1 $6.64 1 $6.64 1 $6.64 2 $6.64 2 + $6.64 2 + $6.64 2 + $6.64 3 $6.64 3 $6.64 3 $6.64 3 $6.64 b. What is the annual rate of return of your investment? The annual rate of return of your investment is %. (Round to two decimal places.) 4 $114.06 4 $107.42 4 $114.06 4…USE THE FOLLOWING INFORMATION FOR THE NEXT 3 QUESTIONS: Part 2 of 3: Assume that you purchase a 30-year $1,000 par value bond, with a 10% coupon, and a yield of 9%. Immediately after you purchase the bond, yields change to 7% and remain at that level to maturity. Assume that you hold the bond for 8 years and then sell it. Interest is paid annually. What is the price of the bond after 8 years? Group of answer choices A. $1,338.17 B. $1,331.84 C. $1,285.17 D. $1,379.18 E. $1,461.00Suppose you purchase a 10-year 5% (semi-annual pay) coupon bond. You plan to hold the bond for six months and then sell it. If the bond’s yield to maturity was 4% when you purchased and sold the bond, what cash flows will you pay and receive from your investment in the bond per $1000 face value?
- Suppose you purchase a 10-year bond with 6.3% annual coupons. You hold the bond for four years, and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 4.6% when you purchased and sold the bond, a. what cash flows will you pay and receive from your investment in the bond per $100 face value? b. what is the annual rate of return of your investment? Cash Flows - $113.39 $6.30 $6.30 $6.30 b. What is the annual rate of return of your investment? The annual rate of return of your investment is %. (Round to one decimal place.) $115.04Suppose you purchase a 10-year bond with 6% annual coupons. You hold the bond for fouryears, and sell it immediately after receiving the fourth coupon. If the bond’s yield to maturitywas 5% when you purchased and sold the bond,a. What cash flows will you pay and receive from your investment in the bond per $100 face value?b. What is the internal rate of return of your investment?Today an investor purchases a 30-year bond (face value =\$1,000) for $627.73. The bond has a coupon rate of 4% and a yield to maturity of 7%. It pays coupons annually (not semiannually). The investor plans to hold the bond for 1 year. If the yield to maturity of the bond becomes 8% at the end of the year, what is the bond rate of return over the year?
- USE THE FOLLOWING INFORMATION FOR THE NEXT 3 QUESTIONS: Part 3 of 3: Assume that you purchase a 30-year $1,000 par value bond, with a 10% coupon, and a yield of 9%. Immediately after you purchase the bond, yields change to 7% and remain at that level to maturity. Assume that you hold the bond for 8 years and then sell it. Interest is paid annually. Now, calculate the realized horizon yield for this bond if you hold it for 8 years and then sell it. Group of answer choices A. 9.16% B. 10.83% C. 6.27% D. 10.01% E. 8.58%Consider a bond with a face value of $2,000 that pays a coupon of $150 for 10 years. Suppose the bond is purchased at $500, and can be resold next year for $400. What is the rate of return of the bond? What is the yield to maturity of the bond?You bought a bond for $970. This bond has a face value of $1,000, 6 years to maturity and a coupon rate of 8%. If you decide to sell the bond after holding it for one year, what will be the increase in the bond price? Answer: