Suppose you buy a bond with a coupon of 9.6 percent today for $1,090. The bond has 6 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 9.6 percent today for $1,090. The bond has 6 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
Transcribed Image Text:Suppose you buy a bond with a coupon of 9.6 percent today for $1,090. The bond has 6 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
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