Bond is the interest rate you earn on your investment

Assignment Help Financial Management

Reference no: EM131575355

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 6 percent for $1,010. The bond has 15 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 %

1. 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 $

2. 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: EM131575355

Questions Cloud

What residual value must the lessor recover to break even : what residual value must the lessor recover to break even in a perfect market with norisk?

What is calculation the internal rate of return of data : What is calculation the Internal Rate of return of the following data

Same level of contribution before the price decrease : How many additional units of the Xgen1 will need to be sold to achieve the same level of contribution before the price decrease?

Optimal to help increase the wealth of ordinary shareholders : “Is there a particular ratio of debt to equity in a company’s capital structure that is optimal to help increase the wealth of ordinary shareholders?”

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

Break-even level of sales in term of number of diamonds sold : What is the accounting break-even level of sales in terms of number of diamonds sold?

Leasing the equipment versus financing : What is the NPV associated with leasing the equipment versus financing it with the lease equivalent loan?

Calculate the contribution per bottle : calculate the contribution per bottle. break-even volume in bottle and dollars. net profit if 1 million bottles are sold.

What would be the present value of benefits : What would be the present value of benefits if all cash flows occurred at mid-year?

User Account

All Pages