Calculate the yield to maturity of bond

Assignment Help Financial Management

Reference no: EM131964402

Suppose that you buy a 5 year bond, with a face value of $2 000, a coupon rate of 2%, and a price of $1 908.41.

a. Calculate the yield to maturity of this bond. AFTER you buy the bond, market interest rates rise to 4%.

b. What will your rate of return be if your holding period is the full 5 years?

c. If you unexpectedly need to sell the bond at the end of the second year, what will your rate of return be?

d. Explain the concept of “interest rate risk” and why it means you probably shouldn’t buy bonds during the recovery phase of the business cycle.

Reference no: EM131964402

Questions Cloud

Suggest for contemporary leaders of a corporation : Any change must be accompanied by a change in values. Why? What might this suggest for contemporary leaders of a corporation?

What should jp morgan do if it wants to reduce beta to : Describe the hedge that minimizes risk. What should JP Morgan do if it wants to reduce Beta to .70? What should it do if it wants to increase Beta to 1.6?

Advantages and disadvantages of operating a small business : Describe the advantages and disadvantages of operating a small business.

How does the cross-currency swap effectively hedge : How does the cross-currency swap effectively hedge the three primary exposures McDonald's has relative to its British subsidiary?

Calculate the yield to maturity of bond : Calculate the yield to maturity of this bond. AFTER you buy the bond, market interest rates rise to 4%.

What is? jpjs accounts receivable? days : What is? JPJ's accounts receivable? days? Fixed asset? turnover? Total asset? turnover? Inventory? turnover? Assume a? 365-day year.

What is the value of a call option on one share of stock : Given this information, what is the value of a call option on one share of stock?

Why is employee involvement so involvement so important : Why is employee involvement so involvement so important? What is and example of it in action?

Develop a table that compares three types of change : PSY-8403 V2: Organizational Development Assignment - For this task, you will develop a table that compares three types of change

User Account

All Pages