3. You buy the 6 percent coupon bond today and the price of the bond is $1.012. Par value o the bond is $1.000. The maturity of the bond is 3 years. a) According to the information given above, what will be the bond's yield to maturity? b) If the bond has currently 3 years left to maturity and suppose that by the end of the year interest rates have changed and the bond's yield to maturity is now only 4%. What will be the bond's rate of return?

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
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3. You buy the 6 percent coupon bond today and the price of the bond is $1.012. Par value of
the bond is $1.000. The maturity of the bond is 3 years.
a) According to the information given above, what will be the bond's yield to maturity?
b) If the bond has currently 3 years left to maturity and suppose that by the end of the year,
interest rates have changed and the bond's yield to maturity is now only 4%. What will be the
bond's rate of return?
Transcribed Image Text:3. You buy the 6 percent coupon bond today and the price of the bond is $1.012. Par value of the bond is $1.000. The maturity of the bond is 3 years. a) According to the information given above, what will be the bond's yield to maturity? b) If the bond has currently 3 years left to maturity and suppose that by the end of the year, interest rates have changed and the bond's yield to maturity is now only 4%. What will be the bond's rate of return?
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