What return did the bondholder earn in this case

Assignment Help Financial Management
Reference no: EM131464256

A 6-year government bond makes annual coupon payments of 5% and offers a yield of 3% annually compounded. Suppose that one year later the bond still yields 3%. What return has the bondholder earned over the 12-month period? Now suppose that the bond yields 2% at the end of the year. What return did the bondholder earn in this case?

Reference no: EM131464256

Questions Cloud

What is the expected operating cash flow for year : What is the expected operating cash flow for year 2 of a project given the following information.
Annual interest rate : You are in desperate need of cash and turn to your uncle, who has offered to lend you some money. What annual interest rate is your uncle charging you?
What is its intrinsic value : A stock just paid dividends of $2.0 per share and dividends are expected to rise 15%, 12%, and 10% for the next 3 years. what is its intrinsic value?
How is a bank leverage ratio computed : Identify and show the key components of a bank’s balance sheet. How is a bank’s leverage ratio computed? What does it describe?
What return did the bondholder earn in this case : A 6-year government bond makes annual coupon payments of 5% and offers a yield of 3% annually compounded. What return did the bondholder earn in this case?
The intrinsic value of equity is unknowable : The intrinsic value of equity is unknowable if the stock does not pay dividends.
Suppose the market rate of interest for an investment : Suppose the market rate of interest for an investment is 8%. What is the default risk premium?
International arbitrages exist in foreign exchange market : Why do international arbitrages exist in foreign exchange market?
Deluxe company expects to pay a dividend : Deluxe Company expects to pay a dividend of $6 per share at the end of year one, $8 per share at the end of year two and then be sold for $140.75 per share.

Reviews

Write a Review

Financial Management Questions & Answers

  What is the duration of this bond

A bond currently sells for $1, 050, which gives it a yield to maturity of 6%. Suppose that if the yield increases by 25 basis points, the price of the bond falls to $1, 025. What is the duration of this bond?

  Prepare the statement of cash flows with a total column

Prepare the statement of cash flows with a total column for the three-year period.- Comment on significant cash flow items in the statement prepared in (a).

  Loss with the terminal stock price for portfolio consisting

Draw a diagram showing the variation of an investor’s profit and loss with the terminal stock price for a portfolio consisting of One share and a short position in one call option. Two shares and a short position in one call option. One share and a s..

  What is the npv for an investment with an initial outlay

What is the NPV for an investment with an initial outlay now of $494, and expected cash inflows of $124, $255 and $319 at the end of years.

  Calculate the firm''s new long-term debt

During the year, Belyk Paving Co. had sales of $2,382,000. Cost of goods sold, administrative and selling expenses, and depreciation expense were $1,443,000, $436,800, and $491,800, respectively. In addition, the company had an interest expense of $2..

  Changes on the difference between profits and cash flow

During the last year of operations, Theta’s accounts receivable increased by $18,000, accounts payable increased by $9,000, and inventories decreased by $3,600. What is the total impact of these changes on the difference between profits and cash flow..

  Taxable project with an expected before-tax return

A corporation has an average tax rate of 25% and a marginal tax rate of 39%. The corporation can invest in a tax-free project with an expected before-tax return of 6.8% or in a taxable project with an expected before-tax return of 10%.

  Debt security with a purpose of consolidating

Assume that in 2007 the U.S. Government issued a debt security with a purpose of consolidating all of the federal national debt. At the time of the issue, each security was priced at $15,000 and promised to pay 10% coupon rate indefinitely, just as i..

  Present value of the yearly payments the state is offering

Sue wins the lottery. The State of Florida offers her $134351 a year for 20 years as her prize. She also has the option of accepting a lump sum payment now. What is the present value of the yearly payments the state is offering? Assume an 8% discount..

  What are the annual net cash flows associated

The management of Casper Company is planning to purchase a new milling machine that will cost $160,000 installed. The old milling machine has been fully depreciated but can be sold for $15,000. The new machine will be depreciated on a straight line b..

  What is the equivalent value of this series at beginning

Consider a series of $141 end-of-period CFs spanning 2013-2027. What is the equivalent value of this series at the beginning 2013?

  Differences between warrants and convertibles

Which of the following statements is most CORRECT with respect to the similarities and differences between warrants and convertibles?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd