Bond is the interest rate you earn on investment

Assignment Help Financial Management

Reference no: EM131456154

The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY).

a. Suppose that today you buy a bond with an annual coupon of 10 percent for $1,050. The bond has 19 years to maturity. What rate of return do you expect to earn on your investment? Assume a par value of $1,000. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Expected rate of return %

b1. Two years from now, the YTM on your bond has declined by 1 percent, and you decide to sell. What price will your bond sell for? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Bond price $

b2. What is the HPY on your investment? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

HPY %

Reference no: EM131456154

Questions Cloud

Approach to operating leverage inhibit firms profitability : Why does a conservative approach to operating leverage inhibit a firm’s profitability?

Simple interest on its investment accounts : First Simple Bank pays 9.8 percent simple interest on its investment accounts. What rate should the bank set if it wants to match First Simple Bank over an inve

What weight should you use for preferred stock : OMG Inc. has 5 million shares of common stock outstanding, What weight should you use for preferred stock in the computation of OMG’s WACC?

What will be the par value of shares after the stock split : What will be the number of shares outstanding after the stock split? What will be the par value of the shares after the stock split?

Bond is the interest rate you earn on investment : The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change.

What is the bonds current market price : Martinez Motors bonds have 10 years remaining to maturity. What is the bonds current market price?

Annual production rate to make this investment justifiable : The minimum annual production rate to make this investment justifiable is:

Financial planning and agency conflicts : "Financial Planning and Agency Conflicts" Recommend two (2) desired characteristics of a board of directors.

What was rate of return on investment for one-month period : An investor purchased 350 shares of a company at $40 per share. What was the rate of return on this investment for the one-month period?

User Account

All Pages