The following is certain information about three bonds. All numerical answers should be calculated to at least two decimal places. By convention, the face value of all bonds is taken as $100. For simplicity, assume coupon payments are paid once a year. Bond A issued by the Federal Government of Canada: coupon rate = 5.25%, term to maturity=5 years, current price $105.35. Bond B issued by Bank of Nova Scotia: coupon rate = 4%, term to maturity= 5 years, yield to maturity = 4.75% p.a. Bond C issued by the Royal Bank of Canada: coupon rate = 4.5%, term to maturity = 5 year, current price = $100, Suppose an investor has purchased Bond B at the above current price. Further 1 suppose the market interest rates increase across the board by 100 basis points a year later because of international conflicts. Find the new bond price, the rate of capital gain or loss and the rate of return.
The following is certain information about three bonds. All numerical answers should be calculated to at least two decimal places. By convention, the face value of all bonds is taken as $100. For simplicity, assume coupon payments are paid once a year. Bond A issued by the Federal Government of Canada: coupon rate = 5.25%, term to maturity=5 years, current price $105.35. Bond B issued by Bank of Nova Scotia: coupon rate = 4%, term to maturity= 5 years, yield to maturity = 4.75% p.a. Bond C issued by the Royal Bank of Canada: coupon rate = 4.5%, term to maturity = 5 year, current price = $100, Suppose an investor has purchased Bond B at the above current price. Further 1 suppose the market interest rates increase across the board by 100 basis points a year later because of international conflicts. Find the new bond price, the rate of capital gain or loss and the rate of return.
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 9P
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