None A 30-year maturity bond has a 7% coupon rate, paid annually. It sells today for $867.42. A 20-year maturity bond has a 6.5% coupon rate, also paid annually. Itsells today for $879.50. A bond market analyst forecasts that in five years, 25-year maturity bonds will sell at yields to maturity of 8% and that 15-yearmaturity bonds will sell at yields of 7.5%. Because the yield curve is upward-sloping, the analyst believes that coupons will be invested in short-term securitiesat a rate of 6%. Answer in percent to two decimal places.Calculate the annual rate of return in percent, including the reinvested coupon payments, for the 30-year bond over the five-year period?Calculate the annual rate of return in percent, including the reinvested coupon payments, for the 20-year bond over the five-year period?

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Answered: A 30-year maturity bond has a 7% coupon…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 10P

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Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for 1,135.90, producing a nominal yield to maturity of 8%. However, the bond can be called after 5 years for a price of 1,050. (1) What is the bonds nominal yield to call (YTC)? (2) If you bought this bond, do you think you would be more likely to earn the YTM or the YTC? Why?
A 30-year maturity bond has a 7% coupon rate, paid annually. It sells today for $867.42. A 20-year maturity bond has a 6.5% coupon rate, also paid annually. It sells today for $879.50. A bond market analyst forecasts that in five years, 25-year maturity bonds will sell at yields to maturity of 8% and 15-year maturity bonds will sell at yields of 7.5%. Because the yield curve is upward sloping, the analyst believes that coupons will be invested in short-term securities at a rate of 6%.a. Calculate the (annualized) expected rate of return of the 30-year bond over the 5-year period.b. What is the (annualized) expected return of the 20-year bond?
A bond that matures in 12 years has a $1,000 par value. The annual coupon interest rate is 7 percent and the market's required yield to maturity on a comparable-risk bond is 18 percent. What would be the value of this bond if it paid interest annually? What would be the value of this bond if it paid interest semiannually?
A 30-year maturity bond has a 6.7% coupon rate, paid annually. It sells today for $881.17. A 20-year maturity bond has a 6.2% coupon rate, also paid annually. It sells today for $893.1. A bond market analyst forecasts that in five years, 25-year maturity bonds will sell at yields to maturity of 7.7% and 15-year maturity bonds will sell at yields of 7.2%. Because the yield curve is upward sloping, the analyst believes that coupons will be invested in short-term securities at a rate of 7.2%. a. Calculate the (annualized) expected rate of return of the 30-year bond over the 5-year period. (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. 30-year bond 44.95% b. What is the (annualized) expected return of the 20-year bond? (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. 20-year bond 41.98 X
A bond has 6 years remaining to maturity, pays annual coupons (yesterday) of $7.4, and has a face value of $100. The current price of the bond is $73.701 and the price next year is expected to be $76.767. (Interest rates are not expected to change over the coming year.) What is the return on the bond if you hold it for one year?by Formula pls.
A bond with a face value of $1,000 has 10 years until maturity, carries a coupon rate of 9%, and sells for $1,100. Interest is paid annually. Assume a face value of $1,000 and annual coupon payments.a) If the bond has a yield to maturity of 9% 1 year from now, what will its price be at that time?b) What will be the rate of return on the bond? c) If the inflation rate during the year is 3%, what is the real rate of return on the bond? Assume annual interest payments.
A bond with 10 years to maturity has a face value of $1,000. The bond can be called in four years for $1050. The bond pays a 6 percent semiannual coupon and the bond has a 1.1 percent nominal yield to maturity. What is the price of the bond today assuming that it will be called?
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s A 25-year maturity bond has a 8 % coupon rate, paid annually. It sells today for $887.42. A 15-year maturity bond has a 7.5% coupon rate, also paid annually. It sells today for $899.5. A bond market analyst forecasts that in five years, 20-year maturity bonds will sell at yields to maturity of 9% and that 10-year maturity bonds will sell at yields of 8.5%. Because the yield curve is upward-sloping, the analyst believes that coupons will be invested in short-term securities at a rate of 7%. Required: a. Calculate the expected rate of return of the 25-year bond over the five-year period. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Expected rate of return % b. What is the expected return of the 15-year bond over the five-year period? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Expected rate of return %
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A bond has 10 years until maturity, a coupon rate of 9%, and sells for $1,100. Interest is paid annually. (Assume a face value of $1,000.) If the bond has a yield to maturity of 9% 1 year from now, what will its price be at that time? Note: Do not round intermediate calculations. What will be the rate of return on the bond? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign. If the inflation rate during the year is 3%, what is the real rate of return on the bond? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign.

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