Question: Why do tou have to set this equal to 920? Wouldn't that mean he's receiving the same amount and no return? Rob wishes to sell

Why do tou have to set this equal to 920? Wouldn't that mean he's receiving the same amount and no return?

that mean he's receiving the same amount and no return? Rob wishes

Rob wishes to sell a bond that has a face value of $1000. The coupon rate on the bond is 4%. Rob bought the bond (from someone else) exactly eight years ago for $920 and wishes to earn a 5% return (yield) on his investment. At what price would he have to now sell the bond so as to have earned the 5% return (yield)? (Rob bought the bond immediately after a coupon payment and also sells the bond immediately after receiving his 8th coupon payment, so he's held the bond for 8 years). 877-917 917-957 957-997 997-1037 None of the above 2 = 8 yrs (bought for $920) 1000x4% = 40 Intwrest annuity 920 = Selling P x 0.6168 + (1000x 47 x 6.4632) Selling P = 977.35 920-258.53 = Se 0.6768 A R

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!

Rob wishes to sell a bond that has a face value of $1000. The coupon rate on the bond is 4%. Rob bought the bond (from someone else) exactly eight years ago for $920 and wishes to earn a 5% return...

Can anyone solve the answers from the given document givenbelow? I really need help. MY FINAL LITERALLY IS KNOCKING AT THE DOOR. Name_________________________________ Student...

SOMEONE PLEASE HELP ME GIVE ALL THE ANSWERS!!!!! MY EXAM IS ON 13th MORNING! SO PLEASEEEEE!!!!! 2. An investment is expected to pay the following: C 1 = $2,300, C 2 = $2,600, C 3 = $2,900, and then...

1. A bank is paying interest at a 5% annual rate on deposits. If you invest 10,000 and the bank compounds interest daily (i.e., 365 times per year), which of the following shows how much you will...

Files 12:56 PM Mon May 16 25% Unit+2+workbook Q . . . Home Insert Draw Layout Review View Calibri Bold (Body) 36 B I U aAv A v Unit 2-Supply and Demand Name: HR: LAW OF SUPPLY Use the space below to...

Learning Objectives 3-1 By the end of this section, you will be able to: Explain demand, quantity demanded, and the law of demand Identify a demand curve and a supply curve Explain supply, quantity...

I have attached the question as a word file, thanks! As we enter week 8, what did you learn from this course? How will the information be useful in your other classes and in your career? Running...

Hello, Can I get some help figuring out the "solution" portion of this excel file. Thank you Ross, Westerfield, and Jordan's Spreadsheet Master Fundamentals of Corporate Finance, 10th edition by Brad...

KYC's stock price can go up by 15 percent every year, or down by 10 percent. Both outcomes are equally likely. The risk free rate is 5 percent, and the current stock price of KYC is 100. (a) Price a...

Lyons Document Storage Corporation: Bond Accounting : In December 2008, Rene Cook sat in her cubicle trying to remember what she had learned in business school about bonds and bond accounting. Ms....

What is a mutual fund? In what sense is it a financial institution?

Presented below is information related to Lexington Real Estate Agency. Oct. 1 Diane Lexington begins business as a real estate agent with a cash investment of $20,000 in exchange for common stock. 2...

Edge Act banks are federally chartered subsidiaries of U . S . banks that are physically located in the United States and are allowed to engage in a full range of banking activities.

A company is preparing completing their Cash Budget. The following data has been prepared for cash receipts and payments. January February March Cash receipts $1,061,200 $1,182,400 $1,091,700 Cash...