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The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bond before it matures, your realized return is known as the holding period yleld (HPY). a. Suppose that today you buy a bond with an annual coupon rate of 9 percent for $1,110. The bond has 16 years to maturity. What rate of return do you expect to earn on your investment? Assume a par value of $1,000. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g. 32.16.) b- Two years from now, the YTM on your bond has declined by 1 percent, and you 1. decide to sell. What price will your bond sell for? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b- What is the HPY on your investment? (Do not round intermediate calculations and 2. enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Expected rate of retum b-1. Bond price % b-2. HPY

The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bond before it matures, your realized return is known as the holding period yleld (HPY). a. Suppose that today you buy a bond with an annual coupon rate of 9 percent for $1,110. The bond has 16 years to maturity. What rate of return do you expect to earn on your investment? Assume a par value of $1,000. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g. 32.16.) b- Two years from now, the YTM on your bond has declined by 1 percent, and you 1. decide to sell. What price will your bond sell for? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b- What is the HPY on your investment? (Do not round intermediate calculations and 2. enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Expected rate of retum b-1. Bond price % b-2. HPY

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 10P
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The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bond before it matures, your realized return is known as the holding period yleld (HPY). a. Suppose that today you buy a bond with an annual coupon rate of 9 percent for $1.110. The bond has 16 years to maturity. What rate of return do you expect to earn on your investment? Assume a par value of $1,000. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g. 32.16.) b- Two years from now, the YTM on your bond has declined by 1 percent, and you 1. decide to sell. What price will your bond sell for? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b- What is the HPY on your investment? (Do not round intermediate calculations and 2. enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Expected rate of retum % b-1. Bond price b-2. HPY
Transcribed Image Text:The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bond before it matures, your realized return is known as the holding period yleld (HPY). a. Suppose that today you buy a bond with an annual coupon rate of 9 percent for $1.110. The bond has 16 years to maturity. What rate of return do you expect to earn on your investment? Assume a par value of $1,000. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g. 32.16.) b- Two years from now, the YTM on your bond has declined by 1 percent, and you 1. decide to sell. What price will your bond sell for? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b- What is the HPY on your investment? (Do not round intermediate calculations and 2. enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Expected rate of retum % b-1. Bond price b-2. HPY
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