2. A $1000 face value bond pays semi-annual coupons at a rate of 8% APR compounded semi-annually. The bond has 20 years to maturity with the next coupon payment due in 6 months. What is the yield to maturity of the bond (stated as an APR with semi-annual compounding) if the bond is currently priced at $1283.71? (rounded to fourth digit)
4. Your client bought a $1000 face-value bond with 20-years remaining to maturity for $1250. The bond pays a semi-annual coupon at 10% APR compounded semi-annually. However, 3 years later (just after receiving his 6th semi-annual coupon payment), he sold the bond for $1226. What was his realized yield (or realized return) stated as an APR with semi-annual compounding? (rounded to fourth digit)
6. Below are some ratings that bonds might receive from Standard & Poor's. All else constant, which bond rating would require the lowest coupon rate in order to price the bond at par?

4.Your client is considering an investment in two bonds. Bond A is a zero-coupon bond that matures in 10 years, and Bond B is a coupon paying bond that matures in 10 years. Both bonds have a face value of $1000 and a yield-to-maturity of 9% APR compounded semi-annually. Given this information, you can tell your client that [Bond A/Bond B] is less sensitive to interest rate changes, so that if interest rates decrease this bond will have [larger percentage increase/smaller percentage increase/larger percentage decrease/smaller percentage decrease] in price.

Answer rating: 100% (QA)

Solving for Yield to Maturity YTM and Realized Return 1 Bond YTM We can use a financial calculator o... View the full answer