The YTM on a bond is the interest rate you earn on your investment if interest rates donât change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY).
a. Suppose that today you buy a bond with an annual coupon of 12 percent for $1,140. The bond has 19 years to maturity. What rate of return do you expect to earn on your investment? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Expected rate of return %
b1. Two years from now, the YTM on your bond has declined by 1 percent, and you decide to sell. What price will your bond sell for? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Bond price $
b2. What is the HPY on your investment? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
HPY %
| The YTM on a bond is the interest rate you earn on your investment if interest rates donât change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). |
| a. | Suppose that today you buy a bond with an annual coupon of 12 percent for $1,140. The bond has 19 years to maturity. What rate of return do you expect to earn on your investment? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
| Expected rate of return | % |
| b1. | Two years from now, the YTM on your bond has declined by 1 percent, and you decide to sell. What price will your bond sell for? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
| Bond price | $ |
| b2. | What is the HPY on your investment? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
| HPY | % |
Related questions
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#6
The YTM on a bond is the interest rate you earn on your investment if interest rates donât change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY).
| a. | Suppose that today you buy a bond with an annual coupon of 11 percent for $1,130. The bond has 18 years to maturity. What rate of return do you expect to earn on your investment? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
| Expected rate of return | % |
| b1. | Two years from now, the YTM on your bond has declined by 1 percent, and you decide to sell. What price will your bond sell for? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
| Bond price | $ |
| b2. | What is the HPY on your investment? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
| HPY | % |
