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.
Problem 6-16 Bond Returns (LO2, 3)
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.)
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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.
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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.
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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.
Information Provided:
Face Value "FV" = $1000
Annual coupon rate = 9%
Annual coupon amount = 9%*$1000 = $90
Number of years to maturity 1 year from now "n"= 10 -1 = 9
Price today = $1100
Annual yield to maturity 1 year from now "r"= 9%
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