(a) Suppose that you have purchased a 10-year zero-coupon bond with face value of $1,000.00 and...
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(a) Suppose that you have purchased a 10-year zero-coupon bond with face value of $1,000.00 and a price of $750.00. If you hold the bond to maturity, what is your annual rate of return? (b) Now suppose you have purchased a 3-year bond with face value of $1,000.00, a 3% annual coupon, and a price of $800. Assuming that you hold the bond to maturity, is the IRR greater or less than the return on the bond in part (a)? (a) Suppose that you have purchased a 10-year zero-coupon bond with face value of $1,000.00 and a price of $750.00. If you hold the bond to maturity, what is your annual rate of return? (b) Now suppose you have purchased a 3-year bond with face value of $1,000.00, a 3% annual coupon, and a price of $800. Assuming that you hold the bond to maturity, is the IRR greater or less than the return on the bond in part (a)?
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Answer rating: 100% (QA)
a To calculate the annual rate of return for a zerocoupon bond you can use the following formu... View the full answer
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