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What rate of return would expect on the investment

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Reference no: EM133021538

Questions -

Q1. XYZ Inc. has a bond with the following characteristics: Par: $8,000Time to maturity: 10 year

Coupon Rate: 5%, semi-annual payments

Yield to maturity: 6%

Calculate the price of the bond. (Enter a positive value and round to 2 decimals)

Q2. Rare Find Inc. has a bond with the following characteristics:

Par: $1,000

Time to maturity: 15 years

Coupon Rate: 7%, semi-annual payments

Yield to maturity: 4%

Calculate the price of the bond. (Enter a positive value and round to 2 decimals)

Q3. Derivation Inc. has a bond with the following characteristics:

Par: $4,000

Time to maturity: 5 years

Coupon Rate: 3%, semi-annual payments

Yield to maturity: 3%

Calculate the price of the bond. (Enter a positive value and round to 2 decimals)

Q4. You own an investment that had a total (nominal) return of 10% last year. Assume the inflation rate was 4%, calculate the real rate of return on the investment using the Exact Fisher Equation.

Q5. Suppose you are given the following information about U.S. Treasury Notes:

A 5-year T-NOTE has a yield to maturity of 0.80%

A 10-year T-NOTE has a yield to maturity of 1.51%

Suppose you are given the following information about U.S. TIPS Notes:

A 5-year TIPS has a yield to maturity of -1.64%

A 10-year TIPS has a yield to maturity of -0.85%

Calculate the 10-year break-even inflation rate using the approximate Fisher Equation.

Q6. Suppose that the real rate of return is 1.5% and the inflation rate is 4.5%, what rate of return would expect on the investment using the exact fisher equation?

Q7. Suppose a 10-year US Treasury Note is yielding 1.51%, and a 10-year Lubbock County Note is yielding 1.10%. If an investor has a marginal tax rate of 25%, calculate the after-tax yield for the taxable bond.

Q8. Suppose a 10-year US Treasury Note is yielding 1.51%, and a 10-year Lubbock County Note is yielding 1.10%. If an investor has a marginal tax rate of 25%, calculate the tax-equivalent yield for the tax-exempt bond.

Q9. Suppose a 10-year US Treasury Note is yielding 1.51%, and a 10-year Lubbock County Note is yielding 1.10%. Calculate the tax rate in which the investor would be indifferent between the two bonds.

Reference no: EM133021538

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