What is the annualized rate of return of your investment

Assignment Help Financial Management

Reference no: EM131997860

Suppose you purchase a 30 -year, zero-coupon bond with a yield to maturity of 6.2 %. You hold the bond for five years before selling it.

a. If the bond's yield to maturity is 6.2 % when you sell it, what is the annualized rate of return of your investment? The annualized rate of return of your investment is ____ %. (Round to two decimal places.)

b. If the bond's yield to maturity is 7.2 % when you sell it, what is the annualized rate of return of your investment? The annualized rate of return of your investment is ____ %. (Round to two decimal places.)

c. If the bond's yield to maturity is 5.2 % when you sell it, what is the annualized rate of return of your investment? Then the annualized rate of return of your investment is ____ %. (Round to two decimal places.)

d. Even if a bond has no chance of default, is your investment risk free if you plan to sell it before it matures? Explain. (Select the best choice below.) the best choice below.)

A. There is always a chance of default, so every bond has risk. B. If there is no chance of default, the investment is risk free no matter when you sell it. C. Even though the yield to maturity changes, if there is no chance of default, then the bond is risk free. D. Even without default, if you sell prior to maturity, you are exposed to risk that the YTM may change.

Reference no: EM131997860

Questions Cloud

Payment of dividend causes debt to equity ratio to triple : Payment of the dividend causes their debt to equity ratio to triple.

Degree of financial leverage under financing alternative : Calculate the EPS based on the expected EBIT under each alternative. Compute the DFL (Degree of Financial Leverage) under each financing alternative.

Discuss briefly the pros and cons of filing : Discuss briefly the pros and cons of filing and applying for a patent Discuss briefly the pros and cons of filing and applying for a patent.

Solutions for economic recession for jobless individuals : Evaluate and analyze the consequences of the solutions for an economic recession for jobless individuals around the age of 22,

What is the annualized rate of return of your investment : If the bond's yield to maturity is 7.2 % when you sell it, what is the annualized rate of return of your investment?

Statements would be required for delight city bus system : Which financial statements would be required for Delight City Bus System for the year end June 30, 2015?

Delinquent on his accounts payable balance : One of your customers is delinquent on his accounts payable balance.

Cumulative mark to market be if silver prices : What will your cumulative mark to market be if silver prices are $19.10 per ounce at expiration?

Reverse stock split-what is the new divisor : If Able undergoes a 1-for-2 reverse stock split, what is the new divisor?

User Account

All Pages