Corporate Finance
Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Chapter 10, Problem 13QAP
Summary Introduction

Adequate information:

The purchase price of a zero coupon bond is $273.82 (1 year ago).

The market rate is 6.4%.

Maturity was 21 years when the bond was purchased.

To calculate: The total returns on bonds for the past year.

Introduction: Bonds refer to the type of security which is given to investors who are ready to lend their money for a certain period of time at offered interest rates.

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Suppose you purchase a ten-year bond with 12% annual coupons. You hold the bond for four years and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 10.64% when you purchased and sold the bond, a. What cash flows will you pay and receive from your investment in the bond per $100 face value? b. What is the internal rate of return of your investment? Note: Assume annual compounding. a. What cash flows will you pay and receive from your investment in the bond per $100 face value? The cash flow at time 1-3 is $ (Round to the nearest cent. Enter a cash outflow as a negative number.) The cash outflow at time 0 is $ number.) (Round to the nearest cent. Enter a cash outflow as a negative The total cash flow at time 4 (after the fourth coupon) is $. (Round to the nearest cent. Enter a cash outflow as a negative number.) b. What is the internal rate of return of your investment? The internal rate of return of your investment is %. (Round to two decimal…
Suppose you purchase a 10-year bond with 6% annual coupons. You hold the bond for fouryears, and sell it immediately after receiving the fourth coupon. If the bond’s yield to maturitywas 5% when you purchased and sold the bond,a. What cash flows will you pay and receive from your investment in the bond per $100 face value?b. What is the internal rate of return of your investment?
Suppose you purchase a 10-year bond with 6.64% annual coupons. You hold the bond for 4 years, and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 5.17% when you purchased and sold the bond, a. what cash flows will you pay and receive from your investment in the bond per $100 face value? b. what is the annual rate of return of your investment? a. What cash flows will you pay and receive from your investment in the bond per $100 face value? The cash flows from the investment are shown in the following timeline: (Round to the best choice below.) OA. Years Cash Flows O B. Years C. Years Cash Flows Cash Flows - $114.06 O D. Years 0 Cash Flows $107.42 0 0 - $111.26 0 $111.26 1 $6.64 1 $6.64 1 $6.64 1 $6.64 2 $6.64 2 + $6.64 2 + $6.64 2 + $6.64 3 $6.64 3 $6.64 3 $6.64 3 $6.64 b. What is the annual rate of return of your investment? The annual rate of return of your investment is %. (Round to two decimal places.) 4 $114.06 4 $107.42 4 $114.06 4…
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