3. Five years ago, John bought the annual - coupon bond of XYZ. The coupon rate is 9%. Five years ago, the yield maturity of XYZ was 8% and the years to maturity of the bond was 15 John has already held it for five years as of to and he is selling XYZ bond today. He reinvested the coupon at the rate of 5% per year over the past five years. The current yield - to - maturity is 11%. Par value is $1,000. What is the geometric rate of return of the investment? Answ all of the followings: Initial Investment = I FV from coupon reinvestments = Price of bond five years later = Total ending value = EV = Rg = _%

3. Five years ago, John bought the annual - coupon bond of XYZ. The coupon rate is 9%. Five years ago, the yield maturity of XYZ was 8% and the years to maturity of the bond was 15 John has already held it for five years as of to and he is selling XYZ bond today. He reinvested the coupon at the rate of 5% per year over the past five years. The current yield - to - maturity is 11%. Par value is $1,000. What is the geometric rate of return of the investment? Answ all of the followings: Initial Investment = I FV from coupon reinvestments = Price of bond five years later = Total ending value = EV = Rg = _%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Vincent purchased a $3,500 bond that was paying a 5.50% coupon rate and had 4 more years to mature. The yield at the time of purchase was 4.20% compounded semi-annually. a. How much did Vincent pay for the bond? Round to the nearest cent b. What was the amount of premium or discount on the bond?
A $6,000 bond had a coupon rate of 5.75% with interest paid semi-annually. Bianca purchased this bond when there were 7 years left to maturity and when the market interest rate was 6.00% compounded semi-annually. He held the bond for 3 years, then sold it when the market interest rate was 5.50% compounded semi-annually. Hi a. What was the purchase price of the bond? Round to the nearest cent. hp SUBMIT QUESTION SAVE PROGRESS
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A $1,000 par value bond was issued 25 years ago at a 12 percent coupon rate. It currently has 15 years remaining to maturity. Interest rates on similar obligations are now 8 percent. What is the current price of the bond? (Look up the answer in Table 16–2.) Assume Ms. Bright bought the bond three years ago when it had a price of $1,050. What is her dollar profit based on the bond’s current price? Further assume Ms. Bright paid 30 percent of the purchase price in cash and borrowed the rest (known as buying on margin). She used the interest payments from the bond to cover the interest costs on the loan. How much of the purchase price of $1,050 did Ms. Bright pay in cash? What is Ms. Bright’s percentage return on her cash investment? Divide the answer to part b by the answer to part c. Explain why her return is so high?
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