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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Below is a list of prices for zero-coupon bonds of various maturities.
Price of $1,000 Par
Maturity (Years) Bond (Zero-Coupon)
1
2
3
$974.85
882.39
847.70
a. A 5.6% coupon $1,000 par bond pays an annual coupon and will mature in 3 years. What should the yield to maturity on the bond
be? (Round your answer to 2 decimal places.)
Yield to maturity
%
b. If at the end of the first year the yield curve flattens out at 6.5%, what will be the 1-year holding-period return on the coupon bond?
(Round your answer to 2 decimal places.)
Holding-period return
%
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Transcribed Image Text:Below is a list of prices for zero-coupon bonds of various maturities. Price of $1,000 Par Maturity (Years) Bond (Zero-Coupon) 1 2 3 $974.85 882.39 847.70 a. A 5.6% coupon $1,000 par bond pays an annual coupon and will mature in 3 years. What should the yield to maturity on the bond be? (Round your answer to 2 decimal places.) Yield to maturity % b. If at the end of the first year the yield curve flattens out at 6.5%, what will be the 1-year holding-period return on the coupon bond? (Round your answer to 2 decimal places.) Holding-period return %
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