Values for a bond bought at par with face value $1000, with yield to maturity of 5% initially, and 2% after 1 year.

Values for a bond bought at par with face value $1000, with yield to maturity of 2% initially, and 5% after 1 year.

Aug 28, 2018 10:49 AM

Instructions

The goal is to create a table for the rates or return on bonds of varying maturities like the one in the notes for Chapter 4. The bond has a face value of $1000 and is bought at par with a coupon rate of x%. After one year, the market yield on the bond changes to y%.

On your table, show the current yield, the resale price P(t+1) the rate of capital gain and the rate of return for bonds is 1,2,3, 5 and 7 years to maturity.

Do a second table for the situation where market yields go from y% to x%.