What rate of return do you expect to earn on investment

Assignment Help Financial Management

Reference no: EM131968139

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 $1,060. The bond has 20 years to maturity. What rate of return do you expect to earn on your investment? Assume a par value of $1,000. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Expected rate of return %

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? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Bond price $

b2. What is the HPY on your investment? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

HPY %

Reference no: EM131968139

Questions Cloud

Use the pi decision rule to evaluate this project. : Suppose your firm is considering investing in a project with the cash flows shown below, Use the PI decision rule to evaluate this project.

Contraction in real economic output : Does this information implies that Japan experienced a contraction in real economic output between 1993 and 2008?

Describe the issues that pertain to global deregulation : Describe the issues that pertain to Global deregulation. Discuss the reaction of Europe to American deregulation. Explain the Liberalization of air transport.

Using the supply-and-demand diagrams for bonds framework : Using the supply-and-demand diagrams for bonds framework, what the effect is on interest rates when the riskiness of bonds rises.

What rate of return do you expect to earn on investment : The bond has 20 years to maturity. What rate of return do you expect to earn on your investment? What is the HPY on your investment?

What constitutes religious violence : What constitutes religious violence? Is religious violence different than secular violence? Can religious violence be justified?

Opportunities to use pricing technique : If your company doesn't currently use price discrimination, are there opportunities to use this pricing technique?

Hindering them from becoming a developed nation : What are the main obstacles within Brazil that is hindering them from becoming a developed nation?

Condorcet paradox and arrow impossibility theorem : Explain the Condorcet Paradox and Arrow's Impossibility Theorem. Provide examples.

User Account

All Pages