For Problems 20-24, assume you just bought a 6.9% $1,000 bond for $920, 22. immediately after...

Transcribed Image Text:

For Problems 20-24, assume you just bought a 6.9% $1,000 bond for $920, 22. immediately after the annual interest payment was paid to the previous owner. The bond matures in 12 years. 20. What is the YTM? 21. Why were you able to buy this bond for less than the $1,000 face value? 22. Why was your YTM greater than the 6.9% coupon rate? 23. You sell the bond in 6 years for $1,040, less brokerage fees of $35. What is your yield during ownership? 24. Why is your yield during ownership greater than the YTM? 27 23. 24. 22-24 27. You buy 35 mutual fund shares at a price of $22.53 per share. You elect to reinvest distributions and, as a result, own 42.381 shares in 6 years. You sell the shares at a price of $31.23, less brokerage fees of $45. Calculate your annual rate of return. For Problems 20-24, assume you just bought a 6.9% $1,000 bond for $920, 22. immediately after the annual interest payment was paid to the previous owner. The bond matures in 12 years. 20. What is the YTM? 21. Why were you able to buy this bond for less than the $1,000 face value? 22. Why was your YTM greater than the 6.9% coupon rate? 23. You sell the bond in 6 years for $1,040, less brokerage fees of $35. What is your yield during ownership? 24. Why is your yield during ownership greater than the YTM? 27 23. 24. 22-24 27. You buy 35 mutual fund shares at a price of $22.53 per share. You elect to reinvest distributions and, as a result, own 42.381 shares in 6 years. You sell the shares at a price of $31.23, less brokerage fees of $45. Calculate your annual rate of return.

Answer rating: 100% (QA)

To answer the questions we need to calculate various values related to the bond and the mutual fund investment Lets go step by step To find the Yield to Maturity YTM of the bond we can use the formula ... View the full answer