Question: An investor purchases a 3 0 - year, zero - coupon bond with a face value of $ 5 , 0 0 0 and a

An investor purchases a 30-year, zero-coupon bond with a face value of $5,000 and a yield to maturity of 6.5%. He sells this bond ten years later. What is the rate of return on his investment, assuming yield to maturity does not change?
A.6.5%
B.5.2%
C.3.9%
D.3.25%
An investor purchases a 30-year, zero-coupon bond with a face value

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

Assume it is Monday, May 1, the first business day of the month, and you have just been hired as the accountant for Colo Company which operates with monthly accounting periods. All of the company's...

Q:

1 The mostcommonpurchaser(s)of bonds are: life insurance companies and pension funds. speculators. DonaldTrump. JamesBond. 5 points QUESTION 2 Which one of the following statements about vanilla...

Q:

Question 1 Consider an economy with / consumers and L goods. For each consumer i e {1, .... / }, the consumption set is R4. Her utility function is given by u'(x') = -) are-Biz, K=1 where ox, ; > 0...

Q:

Homework 2 (Due: In class, Tuesday, 09/24/19) 1. a. A zero-coupon bond pays $1000 in five years. i) What is the value of the bond today? The nominal interest rate i is 3% ii) Price the bond if the...

Q:

.Provide adequate solutions to the following attachments. Consider an economy with a representative consumer whose preferences are represented by the utility function: U(c, l) = log c + ? log l...

Q:

1. a. A zero-coupon bond pays $1000 in five years. i) What is the value of the bond today? The nominal interest rate is 1% ii) Price the bond if the interest rate is now 10% iii) Describe the...

Q:

.Help me solve these questions. Question 1 Run in R the following lines of code: set.seed{63921) x=arima.sim(n=350, model=1ist{ar=c {0 . 7", O .2) ,ma=0. 357)] (a) Explain what each of theSe two...

Q:

.Please include workings Homework 2 (Due: In class, Tuesday, 09/24/19) 1. a. A zero-coupon bond pays $1000 in five years. i) What is the value of the bond today? The nominal interest rate i is 3%....

Q:

Questions 1-8 are based on the following information A liability of $10 million is due in 10 year's time. The yield curve is currently flat at 6.9% per annum. The following 5 portfolios are available...

Q:

Question Three Answer all parts Show all your workings (a) Show the amortisation schedule (under the headings balance, payment interest, and principal) for a 5.0% four year annual pay 300.0 million...

Q:

f. An annual coupon bond has a maturity of eleven years, a face value of $1000, and a coupon rate of 2%. The current market price of the bond is $810.25. Use a grid search to nd the yield to maturity...

Q:

On December 31, 2021, BTS Inc. identified that its intangible asset with a carrying amount of 2,400,000 has been impaired. In estimating the recoverable amount, BTS Inc. has determined that the FV...

Q:

Two primary outcomes of HR management are recruitment and selection. Through HR planning, managers anticipate the future supply of and demand for employees and the nature of workforce issues,...

Q:

Problem 5 Calculating Present Values [ LO 2 ] Imprudential, Incorporated, has an unfunded pension liability of $ 5 8 3 million that must be paid in 1 5 years. To assess the value of the firm's stock,...

Q:

The first scenario will be a Verbal Judo scenario in which your scenario follows the standard Verbal Judo interaction: You need to ask somebody to modify their behavior either to do something or to...

Q:

Although benefits account for a large share of employee compensation, many feel there is little evidence on whether an employer receives an adequate return on the benefits investment. One suggestion...

Q:

Your company, like many others, is experiencing doubledigit percentage increases in health care costs. What suggestions can you offer that may reduce the rate of cost increases?

Q:

Three popular interventions for enhancing worker satisfaction are job enrichment, job rotation, and role analysis. What are the critical differences between these interventions, and under what...