Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. a 7.10 percent coupon bond with 21 years left to m

A 7.10 percent coupon bond with 21 years left to maturity is priced to offer a...

Free

80.2K

Verified Solution

Question

Finance

A 7.10 percent coupon bond with 21 years left to maturity ispriced to offer a 5.2 percent yield to maturity. You believe thatin one year, the yield to maturity will be 5.7 percent.


What would be the total return of the bond in dollars?(Negative amount should be indicated by a minus sign. Donot round intermediate calculations. Round your final answer to 2decimal places.)

What would be the total return of the bond in percent?(Negative amount should be indicated by a minus sign. Donot round intermediate calculations. Round your final answer to 2decimal places.)

Answer & Explanation Solved by verified expert
3.7 Ratings (434 Votes)

                  K = N
Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k]     +   Par value/(1 + YTM)^N
                   k=1
                  K =21
Bond Price =∑ [(7.1*1000/100)/(1 + 5.2/100)^k]     +   1000/(1 + 5.2/100)^21
                   k=1
Bond Price = 1239.37 = beginning price
                  K = N
Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k]     +   Par value/(1 + YTM)^N
                   k=1
                  K =20
Bond Price =∑ [(7.1*1000/100)/(1 + 5.7/100)^k]     +   1000/(1 + 5.7/100)^20
                   k=1
Bond Price = 1164.56 = ending price

total return of the bond in dollar= eniding price+coupon-beginning price

=1164.56+71-1239.37

=-3.81

total return of the bond in percent=(total return of the bond in dollar/beginning price)

=-3.81/1239.37

=-0.31%
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

Solve the linear programming problem.MaximizeP = 40x+ 50ySubject to2x+y ? 16x+y ? 9x+2y = 14x,...

Calculus
Q

Solve the traveling salesman problem for the graph below by finding the total height of...

Geometry
Q

For this problem, carry at least four digits after the decimal in your calculations. Answers may...

Statistics
Q

The inner and outer surface temperatures of a glass window 5 mm thick are 15 and...

Mechanical Engineering
Q

Write this number in standard form.Seven hundred ninethousand eight hundredthirty-one

Biology
Q

a stock has a beta f 1.25, the expected return on the market is 12...

Accounting
Q

US GAAP follows the Historical Cost Concept in valuing the cost of long-term assets. Explain...

Accounting
Q

Shauna Coleman is single. She is employed as an architectural designer for Streamline Design (SD)....

Accounting
Q

HELP ASAP Required information (The following information...

Accounting
Q

View Policies Current Attempt in Progress Journalize the following transactions for Sheridan Company. (If no...

Accounting
Q

QUESTION 2 Northern Supermarkets Plc are a supermarket chain based in the United Kingdom. The...

Finance
Q

A product lists for $326 less 14% and 10%. What third discount rate is needed...

Finance