Realized return is known as the holding period yield

Assignment Help Financial Management

Reference no: EM132071851

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 11 percent for $1,130. The bond has 18 years to maturity. What rate of return do you expect to earn on your investment? Assume a par value of $1,000.

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?

b2. What is the HPY on your investment?

Reference no: EM132071851

Questions Cloud

Compare the responsibility of both management and auditor : Compare the responsibility of both management and the auditor for financial reporting, and give your opinion as to which party should have the greater burden.

What was the firm free cash flow : Amex recently reported $190,000 of sales, $140,000 of operating costs other than depreciation, What was the firm's free cash flow?

Watching the prevention of falls video : After watching the Prevention of Falls video, watch this scenario video of a fall.

Compute the percentage total return and capital gains yield : Stock Valuation: A stock has an initial price of $100 per share, paid a dividend of $2.00 per share during the year, and had an ending share price of $125.

Realized return is known as the holding period yield : If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY).

Explain why equilibrium of supply and demand is desirable : Explain why equilibrium of supply and demand is desirable. Discuss how externalities may prevent market equilibrium and the various governments policies.

Define and give an example of business analytics : Define and give an example of business analytics. Why is this technique becoming so widely used in organizations today?

Draw the decision tree-what should be done : a) Draw the decision tree. What should be done?

Compute the earnings before interest and taxes : Compute the earnings before interest and taxes (EBIT) for a sales level of $300,000

User Account

All Pages