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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.
b. 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?
c. What is the HPY on your investment?
Calculate the amount financed. Calculate the finance charge. Calculate the APR by formula.
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You need a 25-year, fixed-rate mortgage to buy a new home for $255,000. Your mortgage bank will lend you the money at a 5.5 percent APR for this 300-month loan. However, you can only afford monthly payments of $950, so you offer to pay off any remain..
Dinklage Corp. has 6 million shares of common stock outstanding. The current share price is $89, and the book value per share is $8. The company also has two bond issues outstanding. The first bond issue has a face value of $85 million, a coupon rate..
Suppose that your bank imposes the following fees and/ or service charges. Explain the bank's rationale and describe how you would respond as a customer. a. $ 1.50 per item for use of an ATM run by an entity other than your own bank b. $ 4 per transa..
Macro Incorporated is the manufacturer of mini-excavators and is considering producing a new line of equipment in an effort to increase its market share.
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