Realized return will jared earn by purchasing the bond

Assignment Help Financial Management

Reference no: EM131991169

It is now the beginning of a year. Jared is considering the purchase of a 7 percent (coupon rate), 10-year bond that is presently priced to yield 12 percent (i.e. market interest rate is 12 percent). Based on extensive analysis of market interest rates, he thinks rates will fall so that at the end of this year the market yield of this issue will drop to 8 percent. If his expectations are correct, what kind of realized return will Jared earn by purchasing the bond today and selling the bond at the end of the year? (Assuming annual interest)

Reference no: EM131991169

Questions Cloud

Discuss the form and extent of remuneration disclosure : Discuss the form and extent of remuneration disclosure that applies to financial advisers.

What is the value of the project on the basis of flexibility : What is the value of the project on the basis of flexibility and what is the risk adjusted discount rate?

What is new effective interest rate being charged borrower : What is the new effective interest rate being charged the borrower (without prepayment)?

The value appreciation return on this investment : What rate of return will you make solely from the value appreciation return on this investment?

Realized return will jared earn by purchasing the bond : what kind of realized return will Jared earn by purchasing the bond today and selling the bond at the end of the year?

Identify the typical approaches to valuing property : Identify the typical approaches to valuing property? Explain when economic value would be used for risk management purposes?

What is the bond yield-to-maturity : assume that the market price of the bond is $872.00. Given that market price, what is the bond’s yield-to-maturity (expected rate of return).

Determine the optimal decision strategy : Develop a decision tree for this problem and determine the optimal decision strategy.

Develop farmland for motel development : You plan to develop a farmland for motel development. Assume, for simplicity, annual compounding and that no other expenses or costs are involved.

User Account

All Pages