Below is a list of prices for zero-coupon bonds of various maturities.Price of $1, 000 ParBond (Zero-Coupon)$966.78894.28Maturity (Years)1803.54a. A 6.4% coupon $1,000 par bond pays an annual coupon and will mature in 3 years. What should the yield to maturity on the bondbe? (Round your answer to 2 decimal places.)O Answer is complete but not entirely correct.Yield to maturity15.00 8 %b. If at the end of the first year the yield curve flattens out at 8.1%, what will be the 1-year holding-period return on the coupon bond?(Round your answer to 2 decimal places.)* Answer is complete but not entirely correct.Holding-period return969.73 8 %

Given, Par value of the bond = $1,000 Coupon rate = 6.4% Maturity period = 3 years

Below is a list of prices for zero-coupon bonds of various maturities. Price of $1,000 Par Bond (Zero-Coupon) $966.78 Maturity (Years) 2 894.28 3 803.54 a. A 6.4% coupon $1.000 par bond pays an annual coupon and will mature in 3 years. What should the yield to maturity on the bond be? (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Yield to maturity 15.00 O % 123

Below is a list of prices for zero-coupon bonds of various maturities. Price of $1,000 Par Bond (Zero-Coupon) $966.78 Maturity (Years) 2 894.28 3 803.54 a. A 6.4% coupon $1.000 par bond pays an annual coupon and will mature in 3 years. What should the yield to maturity on the bond be? (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Yield to maturity 15.00 O % 123

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter12: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 6FPE

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Similar questions

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Yield to Maturity and Yield to Call Arnot International’s bonds have a current market price of $1,200. The bonds have an 11% annual coupon payment, a $1,000 face value, and 10 years left until maturity. The bonds may be called in 5 years at 109% of face value (call price = $1,090). What is the yield to maturity? What is the yield to call if they are called in 5 years? Which yield might investors expect to earn on these bonds, and why? The bond’s indenture indicates that the call provision gives the firm the right to call them at the end of each year beginning in Year 5. In Year 5, they may be called at 109% of face value, but in each of the next 4 years the call percentage will decline by 1 percentage point. Thus, in Year 6 they may be called at 108% of face value, in Year 7 they may be called at 107% of face value, and so on. If the yield curve is horizontal and interest rates remain at their current level, when is the latest that investors might expect the firm to call the bonds?
What would be the value of the bond described in Part d if, just after it had been issued, the expected inflation rate rose by 3 percentage points, causing investors to require a 13% return? Would we now have a discount or a premium bond? What would happen to the bond’s value if inflation fell and rd declined to 7%? Would we now have a premium or a discount bond? What would happen to the value of the 10-year bond over time if the required rate of return remained at 13%? If it remained at 7%? (Hint: With a financial calculator, enter PMT, I/YR, FV, and N, and then change N to see what happens to the PV as the bond approaches maturity.)