How much would you pay for a perpetual bond that pays an annual coupon of $80 per year and yields on competing instruments are 20%? You would pay $. (Round your response to the nearest penny.) Part 2 If competing yields are expected to change to 8%, what is the current yield on this same bond assuming that you paid $400? The current yield is %. (Round your response to the nearest integer.) Part 3 If you sell this bond in exactly one year, having paid $400, and received exactly one coupon payment, what is your total return if competing yields are 8%? Your total return is %. (Round your response to two decimal places.)

How much would you pay for a perpetual bond that pays an annual coupon of $80 per year and yields on competing instruments are 20%? You would pay $. (Round your response to the nearest penny.) Part 2 If competing yields are expected to change to 8%, what is the current yield on this same bond assuming that you paid $400? The current yield is %. (Round your response to the nearest integer.) Part 3 If you sell this bond in exactly one year, having paid $400, and received exactly one coupon payment, what is your total return if competing yields are 8%? Your total return is %. (Round your response to two decimal places.)

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter14: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 6DTM

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Part 2

If competing yields are expected to change to 8%, what is the current yield on this same bond assuming that you paid

$400?

The current yield is %. (Round your response to the nearest integer.)

Part 3

If you sell this bond in exactly one year, having paid $400, and received exactly one coupon payment, what is your total return if competing yields are 8%?

Your total return is %. (Round your response to two decimal

places.)

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