6.5% coupon rate. also paid annually. It sells today for $879.50. A bond market analyst forecasts that
Question:
6.5% coupon rate. also paid annually. It sells today for $879.50. A bond market analyst forecasts that in rive years. 25 year maturity bonds will sell at yields to maturity of 8% and that 15 year maturity bonds will sell at yields of 7.5%. Because the yield curve is upward sloping. the analyst believes that coupons will be invested in short term securities at a rate of 6%.
a. Calculate the expected rate of return of the 30 year bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Expected rate of return
b. What is the expected return of the 20 year bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Expected rate of return
Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain