1. You purchase a 25-year, $1,000 bond with a coupon rate of 8 percent paid annually. The market rate almost immediately falls to 7 percent. a. What would be your rate of return if you had purchased the bonds with a margin requirement of 40 percent? b. What would be your rate of return if the interest rates increased, immediately after purchase, to 9 percent? I

Ay 4.

suppose you purchase a bond with a coupon of $50 for $1010 you sell it one  year later for $900 What rate of return did you earn?

Suppose you purchased a ten-year, 8% coupon bond(annual coupon payment) at $980. Two years later, you decide to take a vacation and sell the bond to acquire the necessary funds. At the time you sell the bond, eight-year bonds with similar characteristics sell for yields of 9%. What is your realized yield on the bond?

3. What is the present value of a $20,000 payment you would receive 5 years from now, assuming an annual interest rate of 7%? 4. What is the future value 6 years from now of $15,000 you hold today when the annual interest rate is 4%? 5. What is the current price of a discount bond with a face value of $10,000 and an interest rate of 6%? 1

If you purchased a bond one year ago for $1000 and just sold it for $1100 after receiving the $50 annual coupon payment, then what was your real return on the investment if theinflation rate was 2.1% for the same year?

You are considering the purchase of a perpetual bond that pays you $174 per year for the foreseeable future. If you require a 5.85% rate of return on this bond investment, what is a fair price for the bond that you would be willing to pay today? To nearest $0.01

Suppose you are interested in buying a 1.5% semi-annual coupon treasury bond maturing in exactly 10 years. You think appropriate discount rate for this bond (aka yield to maturity or YTM) is 3%. How much should you pay for this bond if its par value is $1,000?

1. What is the yield to maturity on a simple loan for $3 million that requires a repayment of $6 million in three years? 2. What is the yield to maturity of a bond you buy for $900? You are promised to be paid $10 yearly coupon payments forever. The inflation rate is 6% in the economy. 3. What was the rate of return of a $1500 face value coupon bond that had a 6% coupon rate, bought for $1200 and sold for $1100 the next year?

Assume you can buy a bond that has a par value of $1000, matures in 10 years, yielding 6% and has a duration of 5. If you would like to use this bond to form a guaranteed investment contract “GIC” and offer a guaranteed rate of return to investors for certain years. a. what is the maximum yield you can offer? Why? Explain. b. For how many years would you make the guarantee? Explain.