Suppose you buy a bond with a coupon of 7 percent today for $1,130. The bond has 9 years to maturity. Assume interest payments are reinvested at the original YTM. a. What rate of return do you expect to earn on your investment? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Rate of return % b. Two years from now, the YTM on your bond has increased by 2 percent, and you decide to sell. What price will your bond sell for? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price

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
Section: Chapter Questions
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Suppose you buy a bond with a coupon of 7 percent today for $1,130.
The bond has 9 years to maturity. Assume interest payments are
reinvested at the original YTM.
a. What rate of return do you expect to earn on your investment? (Do
not round intermediate calculations. Enter your ans wer as a percent
rounded to 2 decimal places.)
Rate of return
b. Two years from now, the YTM on your bond has increased by 2
percent, and you decide t o sell. What price will your bond sell for? (Do
not round intermediate calculations. Round your answer to 2 decimal
places.)
Price
Transcribed Image Text:Suppose you buy a bond with a coupon of 7 percent today for $1,130. The bond has 9 years to maturity. Assume interest payments are reinvested at the original YTM. a. What rate of return do you expect to earn on your investment? (Do not round intermediate calculations. Enter your ans wer as a percent rounded to 2 decimal places.) Rate of return b. Two years from now, the YTM on your bond has increased by 2 percent, and you decide t o sell. What price will your bond sell for? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price
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