6) John purchased a 10-year 1000-par bond that pays annual coupons at a rate of r. This bond is redeemable at par and was priced at a yield of 4%. After 4 years, John sells the bond to Jane. Jane pays a price that earns her an effective yield of 3%. John actually earned an effective yield of 6.6% over the first 4 years. Find r.

6) John purchased a 10-year 1000-par bond that pays annual coupons at a rate of r. This bond is redeemable at par and was priced at a yield of 4%. After 4 years, John sells the bond to Jane. Jane pays a price that earns her an effective yield of 3%. John actually earned an effective yield of 6.6% over the first 4 years. Find r.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Mark buys a 10-year bond of face (and redemption) amount of $1000, with 10% annual coupons at a price to yield an annual effective rate of 10%. The coupons are immediately reinvested at an annual effective rate of 8% once received. Immediately after receiving and reinvesting the 4th coupon, Mark sells the bond to Jeno for a price that will yield an annual effective rate of 12% to Jeno. Calculate the yield rate that Mark actually earns on his investment.
Reed buys a 20-year, $15,770, zero-coupon bond with an annual YTM of 4.26%. If he sells the bond after 7 years for $9,225.71, he will have a positive profit. Select one: True or False
Shane buys a 14-year, $150,500, zero-coupon bond with an annual YTM of 4.32%. If he sells the bond after 6 years for __________ or higher, he will have a positive profit. A. $100,030.11 B. $103,420.75 C. $106,881.60 D. $107,299.05
Four years earlier, Janice purchased a $1,000 face value corporate bond with a 6% annual coupon and maturing in 10 years. At the time of the purchase, it had an expected yield to maturity of 8.76%. If Janice sold the bond today for $1,088.39, what rate of return would she have earned for the last four years?
Kendra buys a 7 year, $100,000.00 face value, 4.250% coupon bond. The bond is priced to yield r(365) = 2.000%, and is secured by a sinking fund (set up by the issuer with quarterly deposits), that earns 5.750% compounded weekly. On default, Kendra claims the balance in the sinking fund. How much does she lose if the issuer defaults after 6 years (just after making their coupon payment, and sinking fund deposit).
Sascha owns stock in Lewis Corp and she bought a $5,000 corporate bond. She received $52.50 in quarterly interest from the bond. Sascha also owns stock in Lewis Corp which is worth $46 per share, and it pays a $2 annual dividend. If Lewis Corp later offers corporate bonds at an annual interest rate that is one percent higher than half the of the bond Sascha bought, create an equation that models the quarterly interest earned, q, for any given bond face value, v.
Four years ago, Sandra Stills bought six-year, 5.5 percent coupon bonds issued by the Oriole Corp. For $944.99 she sells these bonds at the current price of $892.26, what will be her realized yield on the bonds? Assume similar coupon-paying bonds make annual coupon payments. Assume face value is $1000. (Round to 2 decimal places)
Last year Janet purchased a $1,000 face value corporate bond with an 8%annual coupon rate and a 15-year maturity. At the time of the purchase, it had an expectedyield to maturity of 10.45%. If Janet sold the bond today for $820.17, what rate of returnwould she have earned for the past year?
Louis bought a $100 par value 5-year bond with 10% semiannual coupons ata purchase price of $94. After receiving the 5th coupon, Louis sold the bond to Raymond. Find the yield to maturity for Raymond, if the realized yieldfor Louis is 12% compounded semiannually.
Isabel prefers to purchase bonds that contain a sinking fund provision to protect her from any potential loss of her invested capital. She purchased a 20-year, $20,000 sinking fund bond with a 12% coupon, paid seml-annually, for $18,900. If the company calls the bond after 10 years, and the call penaity requires a payment of $30 per $1,000 of face value, what are the yeilds to maturity and yeild to call on this bond? -previous answered questions were wrong, show calculations.
Dean Yeagley bought a $1,000 face value, 7% coupon, 15-year bond for $1,100. Seven years after she bought the bond, she sold it for $1,200. What was her holding period yield? a. 6.73% b. 7.40% c. 9.16% d. 5.26%
Last year, Sally purchased a $1,000 face value corporate bond with an 11.2 percent annual coupon rate and a 12-year maturity. At the time of the purchase, it had an expected yield to maturity of 11.9 percent. If Sally sold the bond today for $949.88, what rate of return would she have earned for the past year? a. 11.02% b. 11.20% c. 11.10% d. –0.69% e. 10.51%

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