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A 5-year government bond with a face value of £100 makes annual coupon payments of 6 per cent and offers a yield to maturity of 4 per cent compounded annually. Suppose that one year later bond yields for bonds of this risk class have fallen to 3 per cent. What is (i) the price of the bond in one year (to the nearest £0.01) and (ii) the rate of return (to the nearest 0.01%) which the bondholder has earned over the 12-month period from today to one year from now?   a 111.15     4%   b 111.15    7.57%   c none of the above   d  108.90     4%   e 108.90   7.57%

A 5-year government bond with a face value of £100 makes annual coupon payments of 6 per cent and offers a yield to maturity of 4 per cent compounded annually. Suppose that one year later bond yields for bonds of this risk class have fallen to 3 per cent. What is (i) the price of the bond in one year (to the nearest £0.01) and (ii) the rate of return (to the nearest 0.01%) which the bondholder has earned over the 12-month period from today to one year from now?   a 111.15     4%   b 111.15    7.57%   c none of the above   d  108.90     4%   e 108.90   7.57%

Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 8MC: Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for...
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A 5-year government bond with a face value of £100 makes annual coupon payments of 6 per cent and offers a yield to maturity of 4 per cent compounded annually. Suppose that one year later bond yields for bonds of this risk class have fallen to 3 per cent. What is (i) the price of the bond in one year (to the nearest £0.01) and (ii) the rate of return (to the nearest 0.01%) which the bondholder has earned over the 12-month period from today to one year from now?

 

a 111.15     4%

 

b 111.15    7.57%

 

c none of the above

 

d  108.90     4%

 

e 108.90   7.57%

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