A Macrohard Corp. bond carries an 8% coupon, paid annually and has 10 years to maturity. The par value is $1000 and the required rate of return is 5%.   a) Calculate the price of the bond today (P0) b) Is this a discount or premium bond? Explain? c) Calculate the price of the bond one year from now (P1)

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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  1. A Macrohard Corp. bond carries an 8% coupon, paid annually and has 10 years to maturity. The par value is $1000 and the required rate of return is 5%.

 

a) Calculate the price of the bond today (P0)

b) Is this a discount or premium bond? Explain?

c) Calculate the price of the bond one year from now (P1)

d) If you buy the bond today and sell it one year from now, calculate 

    i) Current yield

    ii) Capital gains yield

    iii) Total rate of return (yield)

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