Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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b) A bond was issued on 1 July 2018. Below is the timeline of all cash flows payable by the bond until maturity.
$57
$57 $57 $57 $57 $57 $57 $1,057
1/07/18 1/07/19 1/07/20 1/07/21 1/07/22 1/07/23 1/07/24 1/07/25 1/07/26
Cash flows
Years
Mat purchased the bond on 1 July 2021 at a price that gave him a yield to maturity of 5% p.a. effective.
Using this information answer parts i), ii) and iii) below
i) Without calculate the purchase price, can you tell if Mat bought the bond at discount or at a premium?
State your reason. (
Calculate the price Mat paid for the bond. (Round your answer to the nearest cent) /
iii) Mat plans to sell the bond on 1 July 2024 right after he gets the coupon. If Mat can sell the bond at a price
of $1,032.06, calculate the total holding period return he can earn for this investment. (Round your answer
to the nearest 0.01%)
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Transcribed Image Text:b) A bond was issued on 1 July 2018. Below is the timeline of all cash flows payable by the bond until maturity. $57 $57 $57 $57 $57 $57 $57 $1,057 1/07/18 1/07/19 1/07/20 1/07/21 1/07/22 1/07/23 1/07/24 1/07/25 1/07/26 Cash flows Years Mat purchased the bond on 1 July 2021 at a price that gave him a yield to maturity of 5% p.a. effective. Using this information answer parts i), ii) and iii) below i) Without calculate the purchase price, can you tell if Mat bought the bond at discount or at a premium? State your reason. ( Calculate the price Mat paid for the bond. (Round your answer to the nearest cent) / iii) Mat plans to sell the bond on 1 July 2024 right after he gets the coupon. If Mat can sell the bond at a price of $1,032.06, calculate the total holding period return he can earn for this investment. (Round your answer to the nearest 0.01%)
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