One year ago, an investor purchased a 10-year 8% annual coupon bond at par of $1,000....
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
One year ago, an investor purchased a 10-year 8% annual coupon bond at par of $1,000. Today (with 9 years to maturity) the bond is priced to yield 7.05%. If the bond is sold, what is the total return to the investor (interest plus appreciation) for the 1-year holding period? Hint: The total return includes the coupon rate plus the appreciation (or depreciation) due to the change in rates. Therefore, calculate the current price based on the yield, and then calculate the total return over 1 year based on that price and the coupon payment. Your answer should be between 6.32 and 17.42, rounded to 2 decimal places, with no special characters. One year ago, an investor purchased a 10-year 8% annual coupon bond at par of $1,000. Today (with 9 years to maturity) the bond is priced to yield 7.05%. If the bond is sold, what is the total return to the investor (interest plus appreciation) for the 1-year holding period? Hint: The total return includes the coupon rate plus the appreciation (or depreciation) due to the change in rates. Therefore, calculate the current price based on the yield, and then calculate the total return over 1 year based on that price and the coupon payment. Your answer should be between 6.32 and 17.42, rounded to 2 decimal places, with no special characters.
Expert Answer:
Answer rating: 100% (QA)
To calculate the total return on the bond for the 1year holding period you can follow these steps 1 ... View the full answer
Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
Posted Date:
Students also viewed these finance questions
-
Pavlovich Prosthetics Company produces artificial limbs for individuals. Each prosthetic is unique. On January 1, three jobs, identified by the name of the person being fitted with the prosthetic,...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Explain the meaning of the terms emoluments, employments and office for the purposes of PAYE as you earn systems. 2. Explain the actual receipts basis of assessing the emoluments from the employment...
-
____, one-way ANOVA compares the means of three or more independent samples.
-
What are the major provisions of SOX?
-
Wheeler and Mathews (J.Biol.Chem.286:16992-16996,2011) reported the concentrations of adenine nucleotides in rat liver mitochondria as follows: ATP, 5.5 mM; ADP, 5.1 mM; AMP, 1.8 mM. (a) Calculate...
-
Pleading rules are principally contained in the California Code of Civil Procedure. However, in addition to the CCP, local rules generally control mechanics. Find some special local rules that are...
-
The Best Beer Corporation has a beer-processing facility located in Columbus, Ohio. The beer facility has a system efficiency of 90 percent, and the utilization is 80 percent. Three sub-facilities...
-
Cottage Company deposits all cash receipts on the day they are received, and it makes all cash payments by check. At the close of business on December 31, its Cash account shows a debit balance of...
-
Reconsider the Skycell data in Exercise 1. Assume that the plant has 1,250 employees and a no-layoff policy. Overtime is limited to at most 20 hours per employee per month. Also assume no...
-
The E.N.D. partnership has the following capital balances as of the end of the current year. Pineda Adams Fergie Gomez Total capital $ 280,000 240,000 210,000 190,000 $ 920,000 Answer each of the...
-
Zachary Concrete Company pours concrete slabs for single - family dwellings. Lancing Construction Company, which operates outside Zachary s normal sales territory, asks Zachary to pour 5 1 slabs for...
-
5. (5 pts) Briefly explain, from a thermal perspective why there is an "optimal" spacing between the inner and outer glass panes in double-paned windows. 6. (5 pts) Consider a double pane window...
-
Use the following selected data from Business Solutions's income statement for the three months ended March 31, 2022, and from its March 31, 2022, balance sheet to complete the requirements. Computer...
-
Pumps can be set in series or in parallel depending on the desired output. If the flow rate needs to be increased, the pumps are put in parallel. On the other hand, if the head has to be increased,...
-
P Corporation acquired an 80% interest in S Corporation on January 1, 2023, when the book values of S assets and liabilities were equal to their fair values. The cost of the 80% interest was equal to...
-
Paul Plowright was delighted to be able to leave behind the hustle and bustle of the city and move to the peace and quiet of the country. He was especially pleased to have been able to acquire the...
-
Juarez worked for Westarz Homes at construction sites for five years. Bever was a superintendent at construction sites, supervising subcontractors and moving trash from sites to landfills. He...
-
Compute the cost of not taking the following trade discounts: a. 2/10, net40 b. 2/15, net30 c. 2/10, net45 d. 3/10, net180
-
Is there any validity in rule-of-thumb ratios for all corporations (for example, a current ratio of 2 to 1 or debt to assets of 50 percent)?
-
Why is trend analysis helpful in analyzing ratios? What are the problems of trend analysis when different bases of accounting are applied to different years?
-
Extracts from the ledgers of Hall Ltd have provided the following information for 2009 and 2010. Sales revenue 2009 Sales revenue 2010 Purchases 2009 Purchases 2010 Expenses 2009 Expenses 2010...
-
(a) Explain why there are always problems at the year-end in the assessment of the costs associated with electricity, gas, and telephone. (b) Using the information below, prepare the appropriate...
-
Arthur Moment set up a table-making business, Forlegco, on 1 July 2010. He had 10,000 available to invest, which is the amount he estimated was required for setting up costs. In the first month of...
Study smarter with the SolutionInn App