1
answer
0
watching
515
views
28 Sep 2019
A 30-year maturity bond has a 6.7% coupon rate, paid annually. It sells today for $881.17. A 20-year maturity bond has 6.2% coupon rate, also paid annually. It sells today for $893.1. A bond market analyst forecasts that in 5 years, 25-year maturity bonds will sell at yields to maturity of 7.7% and 15-year maturity bonds will sell at yields of 7.2%. Because the yield curve is upward sloping, the analyst believes that coupons will be invested in short-term securities at a rate of 7.2%. What rate of return does each bond offer over the 5-year period?
A 30-year maturity bond has a 6.7% coupon rate, paid annually. It sells today for $881.17. A 20-year maturity bond has 6.2% coupon rate, also paid annually. It sells today for $893.1. A bond market analyst forecasts that in 5 years, 25-year maturity bonds will sell at yields to maturity of 7.7% and 15-year maturity bonds will sell at yields of 7.2%. Because the yield curve is upward sloping, the analyst believes that coupons will be invested in short-term securities at a rate of 7.2%. What rate of return does each bond offer over the 5-year period?
Nelly StrackeLv2
28 Sep 2019
