You purchased a zero coupon bond one year ago for $286.40. The market interest rate is now
Question:
You purchased a zero coupon bond one year ago for $286.40. The market interest rate is now 6.1 percent. If the bond had 21 years to maturity when you originally purchased it, what was your total return for the past year? Assume semiannual compounding.
Step by Step Answer:
Total return f...View the full answer
Corporate Finance
ISBN: 9781260772388
13th Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe
Related Video
Bond valuation is the process of determining the worth of a bond. It is based on the present value of the bond\'s future cash flows, which include coupon payments and the return of the bond\'s face value (or \"principal\") at maturity. The discount rate used in the calculation is directly tied to prevailing interest rates, and a rise in interest rates will decrease the present value of the bond and thus lower its price. Conversely, a fall in interest rates will increase the present value of the bond and raise its price. Interest rates serve as a benchmark for determining the value of a bond, as they determine the discount rate used in the bond valuation calculation. The most commonly used measure of interest rates is the yield to maturity (YTM), which represents the internal rate of return of an investment in a bond if the investor holds the bond until maturity and receives all scheduled payments. Yield to maturity is a function of the coupon rate, the current market price of the bond, the face value of the bond, and the number of years remaining until maturity. By comparing the yield to maturity of a bond to prevailing market interest rates, an investor can assess the relative value of the bond.
Students also viewed these Business questions
-
You purchased a zero coupon bond one year ago for $109.83. The market interest rate is now 9 percent. If the bond had 25 years to maturity when you originally purchased it, what was your total return...
-
You purchased a zero coupon bond one year ago for $425.32. The market interest rate is now 4.3 percent. If the bond had 20 years to maturity when you originally purchased it, what was your total...
-
You purchased a zero coupon bond one year ago for $160.53. The market interest rate is now 7.5 percent. If the bond had 25 years to maturity when you originally purchased it, what was your total...
-
What effect does a weakening in U.S dollar have on Net Income for subsidiaries of U.S companies?
-
An article in Quality Progress (For Starbucks, Its in the Bag, March 2011, pp. 18-23) describes using a central composite design to improve the packaging of one-pound coffee. The objective is to...
-
1. How is the element of analysis integrated into the decision-making of financial institutions regarding the granting of financing, to mitigate possible credit risks? 2. What tools or techniques do...
-
Which financial statement assertion is served by confirming bonds, notes, and interest payments directly with trustees? a. Completeness. b. Valuation. c. Rights. d. Presentation and disclosure....
-
Kras, Inc., was organized and authorized to issue 50,000 shares of $100 par value, 9 percent [referred stock and 50,000 a shares of no-par, $5 stated value common stock on July 1, 2011. Stock-related...
-
Sketch a cumulative flow diagram that represents the growth and dissipation of a rush hour period at a toll bridge with time-independent capacity. 1) Identify on the diagram: the arrival curve A(t),...
-
Princess Cruises recently offered a 16-day voyage from Beijing to Bangkok during the time period from May to August. The announced price, excluding airfare, for a room with an ocean view or a balcony...
-
Asset W has an expected return of 8.8 percent and a beta of .85. If the risk-free rate is 2.6 percent, complete the following table for portfolios of Asset W and a risk-free asset. Illustrate the...
-
What was the arithmetic average annual return on large-company stocks from 1926 through 2020? a. In nominal terms? b. In real terms?
-
An investment portfolio contains stocks of a large number of corporations. Over the last year the rates of return on these corporate stocks followed a normal distribution with mean 12.2% and standard...
-
Here is the state table for you to complete: PresentState C B A 0 0 0 0 1 0 1 1 1 1 1 0 1 1 0 1 1 0 NextStae C B A 1 1 1 0 0 1 1 1 1 1 0 1 0 1 JC 0 0 X JB X X 0 1 KB JA KA X 1 X X X 1 x 1 x 0
-
1. A binary search of a sorted array with 3 unique elements where the search is always successful can be viewed as an array with each element having a probability of being selected = 1/3 and the...
-
Part 1 - Forms and Validation 1. In this assignment, you will create a new JavaScript file to include all of the existing validation routines. After creating the file, validation service.js, move the...
-
FUNCTION 1. Write a function that takes a number and a character (as parameters) and prints a triangle of that size using the specified character. 2. Write a function that takes the radius of a...
-
Your Task: Our objective is to construct classifiers that can precisely identify hospitals with ratings below the U.S. average. After thoroughly examining the data and eliminating missing values as...
-
The Na+ concentration of a solution was determined by measurements with a sodium ion-selective electrode. The electrode system developed a potential of -0.2462 V when immersed in 10.0 mL of the...
-
Air pollution generated by a steel mill is an example of a) a positive production externality. b) a negative production externality. c) a public good. d) the free-rider problem. State and local taxes...
-
In broad terms, why is some risk diversifiable? Why are some risks nondiversifiable? Does it follow that an investor can control the level of unsystematic risk in a portfolio, but not the level of...
-
In broad terms, why is some risk diversifiable? Why are some risks nondiversifiable? Does it follow that an investor can control the level of unsystematic risk in a portfolio, but not the level of...
-
Suppose the government announces that, based on a just completed survey, the growth rate in the economy is likely to be 2 percent in the coming year, compared to 5 percent for the year just...
-
cos (2x2)-1 Let f(z) = Evaluate the 6th derivative of fat z = 0. 2 f(0) (0)= Hint: Build a Maclaurin series for f(x) from the series for cos(x).
-
Do you think that it should be legal to falsely implicate a suspect as a participant in a crime by suggesting that there is physical evidence from their person, reflecting that they were present at...
-
In this practice activity, you will identify key roles and responsibilities of criminal justice professionals regarding victims. You will also describe potential consequences to victims when those...
Study smarter with the SolutionInn App