Suppose you have purchased a 10% coupon bond with a face value of 1410 KWD at a price of 1040. Supposethat after one year the bond price increased to 2480.Calculate the current yield (DO NOT multiply it by 100):Calculate the capital gain (DO NOT multiply it by 100):Input the numbers with at least four digits after the decimal point.Note that the rate of return consists of two parts: current yield and capital gain, and is defined to be:R= + H where C is the periodic payments that the bond pays.Check

Current yield and capital gain yield are two components of holding period return that is being…

Answered: Suppose you have purchased a 10% coupon…

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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What makes for a good investment? Use the approximate yield formula or a financial calculator to rank the following investments according to their expected returns. Buy a stock for $30 a share, hold it for three years, and then sell it for $60 a share (the stock pays annual dividends of $2 a share). Buy a security for $40, hold it for two years, and then sell it for $100 (current income on this security is zero). Buy a one-year, 5 percent note for $1,000 (assume that the note has a $1,000 par value and that it will be held to maturity).
Suppose there is a large probability that L will default on its debt. For the purpose of this example, assume that the value of Ls operations is 4 million (the value of its debt plus equity). Assume also that its debt consists of 1-year, zero coupon bonds with a face value of 2 million. Finally, assume that Ls volatility, , is 0.60 and that the risk-free rate rRF is 6%.
One year ago, an investor purchased a 10-year 8% annual coupon bond at par of $1,000. Today (with 9 years to maturity) the bond is priced to yield 7.40%. If the bond is sold, what is the total return to the investor (interest plus appreciation) for the 1-vear holding period? Hint: The total return includes the coupon rate plus the appreciation (or depreciation) due to the change in rates. Therefore, calculate the current price based on the yield, and then calculate the total return over 1 year based on that price and the coupon payment. Your answer should be between 6.32 and 17.42, rounded to 2 decimal places, with no special characters.

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