EPS Group has bonds outstanding with a 7.61 percent nominal yield to maturity. The current rate of inflation is 4.2 percent. What is the real rate of return on these bonds?
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EPS Group has bonds outstanding with a 7.61 percent nominal yield to maturity. The current rate of inflation is 4.2 percent. What is the real
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- The outstanding bonds of Winter Tires Inc. provide a real rate of return of 4.2 percent. If the current rate of inflation is 5.8 percent, what is the actual nominal rate of return on these bonds?The outstanding bonds of CEPS Group provide a nominal yield to maturity of 7.19 percent. The real rate of return is 3.71 percent. What is the rate of inflation?A corporate bond is quoted at a price of 98.96 and has a coupon rate of 4.7 percent, paid annually. What is the current yield? a. 5.36 percent b. 4.75 percent c. 4.85 percent d. 4.24 percent e. 5.62 percent
- If the real rate of interest is 2%, inflation is expected to be 3% during the coming year, and the default risk premium, illiquidity risk premium, and maturity risk premium for the Bonds-R-Us Corporation are all 1% each, what would be the yield (stated rate) on a Bonds-R-Us bond?Currently, a one-year Treasury bill is yielding 3.8 percent. Company F's three-year bond has a yield equal to 5.1 percent, and its seven-year bond has a yield equal to 5.9 percent. Although none of the bonds has a liquidity premium, any bond with a maturity equal to one year or longer has a maturity risk premium (MRP). Except for their terms to maturity, the characteristics of the bonds are the same. Compute the annual MRP associated with the bonds. Round your answer to one decimal place. % Compute the default risk premium (DRP) associated with the bonds. Round your answer to one decimal place. %HKABC Limited. has bonds on the market with 13 years to maturity, a yield-to-maturityof 9.2 percent, and a current price of $895.09. The bonds make semi-annual payments.What is the coupon rate?
- A corporate bond is currently quoted at a price of $1197.93 and carries a 10 percent annual coupon rate. The bond’s face value is $1000, and pays coupon semiannually. What is the current yield of the bond? Suppose the bond price in one year is $1193.68, assuming no change in yield-to-maturity, what is the capital gain yield? What is the yield-to-maturity for this bond?(a) Compute the market price (Vb) of the following bonds: (6)$1,000 par value, 10-yr maturity, and 8% coupon rate that is paid semi-annually? Assume the yield to maturity of 12%.$1,000 par value, 10-yr maturity, and 6% coupon rate that is paid semi-annually? Assume the yield to maturity of 12%.$1,000 par value, 10-yr maturity, and 8% coupon rate that is paid semi-annually? Assume the yield to maturity of 6%.(b) Based on your answers comment on the relationship (what happens to one variable when the other goes up/down) of (a) price with yield to maturity and (b) price with coupon rate. (4)The current rate of inflation is 3 percent, and long-term Treasury bonds are yielding 7 percent. You estimate that the rate of inflation will increase to 6 percent. What do you expect to happen to long-term bond yields? Compute the effect of this change in inflation on the price of a 15-year, 10 percent coupon bond with a current yield to maturity of 8 percent.
- Suppose the real risk-free rate is 2.80%, the average future inflation rate is 2.30%, a maturity premium of 0.25% per year to maturity applies, i.e., MRP = 0.25%(t), where t is the number of years to maturity. Suppose also that a liquidity premium of 0.50% and a default risk premium of 2.50% applies to A-rated corporate bonds. What is the difference in the yields on a 5-year A-rated corporate bond and on a 10-year Treasury bond? Here we assume that the pure expectations theory is NOT valid, and disregard any cross-product terms, i.e., if averaging is required, use the arithmetic average. a. 4.25 p.p. b. 2.25 p.p. c. 4.19 p.p. d. 3.00 p.p. e. 1.75 p.p. Please explain process and show calculationsLydic Corporation has bonds on the market with 15.5 years to maturity, a YTM of 7.6 percent, a par value of $1,000, and a current price of $1,063. The bonds make semiannual payments. What must the coupon rate be on these bonds? \A company's 5-year bonds are yielding 9% per year. Treasury bonds with the same maturity are yielding 5.1% per year, and the real risk-free rate (r*) is 2.35%. The average inflation premium is 2.35%, and the maturity risk premium is estimated to be 0.1 × (t - 1)%, where t = number of years to maturity. If the liquidity premium is 0.9%, what is the default risk premium on the corporate bonds? Round your answer to two decimal places.