A ten-year, zero-coupon bond with a yield to maturity of 8% has a face value of $5,000. An investor purchases the bond when it is initially traded, and then sells it four years later. What is the rate of return of this investment, assuming the yield to maturity does not change? O A. 5% OB. 4% OC. 6% O D. 8% C
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- Bond Yields and Rates of Return A 10-year, 12% semiannual coupon bond with a par value of 1,000 may be called in 4 years at a call price of 1,060. The bond sells for 1,100. (Assume that the bond has just been issued.) a. What is the bonds yield to maturity? b. What is the bonds current yield? c. What is the bonds capital gain or loss yield? d. What is the bonds yield to call?Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for 1,135.90, producing a nominal yield to maturity of 8%. However, the bond can be called after 5 years for a price of 1,050. (1) What is the bonds nominal yield to call (YTC)? (2) If you bought this bond, do you think you would be more likely to earn the YTM or the YTC? Why?Bond Value as Maturity Approaches An investor has two bonds in his portfolio. Each bond matures in 4 years, has a face value of 1,000, and has a yield to maturity equal to 9.6%. One bond, Bond C, pays an annual coupon of 10%; the other bond, Bond Z, is a zero coupon bond. Assuming that the yield to maturity of each bond remains at 9.6% over the next 4 years, what will be the price of each of the bonds at the following time periods? Fill in the following table:
- Current Yield with Semiannual Payments A bond that matures in 7 years sells for $1,020. The bond has a face value of $1,000 and a yield to maturity of 10.5883%. The bond pays coupons semiannually. What is the bond’s current yield?Yield to Maturity and Yield to Call Arnot International’s bonds have a current market price of $1,200. The bonds have an 11% annual coupon payment, a $1,000 face value, and 10 years left until maturity. The bonds may be called in 5 years at 109% of face value (call price = $1,090). What is the yield to maturity? What is the yield to call if they are called in 5 years? Which yield might investors expect to earn on these bonds, and why? The bond’s indenture indicates that the call provision gives the firm the right to call them at the end of each year beginning in Year 5. In Year 5, they may be called at 109% of face value, but in each of the next 4 years the call percentage will decline by 1 percentage point. Thus, in Year 6 they may be called at 108% of face value, in Year 7 they may be called at 107% of face value, and so on. If the yield curve is horizontal and interest rates remain at their current level, when is the latest that investors might expect the firm to call the bonds?A ten - year, zero - coupon bond with a yield to maturity of 6.4% has a face value of $1,000. An investor purchases the bond when it is initially traded, and then sells it four years later. What is the annual rate of return of this investment, assuming the yield to maturity does not change? O A. 3.2% O B. 5.1% O c. 6.4% O D. 3.8%
- A ten-year, zero-coupon bond with a yield to maturity of 6.9% has a face value of $5,000. An investor purchases the bond when it is initially traded, and then sells it four years later. What is the annual rate of return of this investment, assuming the yield to maturity does not change? OA. 6.9% OB. 4.1% OC. 5.5% OD. 3.5%note:- give me answer( d) explan answer Suppose you purchase a 30-year, zero-coupon bond with a yield to maturity of 6%. You hold the bond for five years before selling it. a. If the bond's yield to maturity is 6% when you sell it, what is the internal rate of return of your investment? b. If the bond's yield to maturity is 7% when you sell it, what is the internal rate of return of your investment? c. If the bond's yield to maturity is 5% when you sell it, what is the internal rate of return of your investment? d. Even if a bond has no chance of default, is your investment risk free if you plan to sell it before it matures? Explain. Note: Assume annual compounding.An investor purchases a 30 -year, zero-coupon bond with a face value of $5,000 and a yield to maturity of 6.5%. He sells this bond ten years later. What is the rate of return on his investment, assuming yield to maturity does not change? A. 6.5% B. 5.2% C. 3.9% D. 3.25%
- An investor purchases a 30-year, zero-coupon bond with a face value of $5,000 and a yield to maturity of 8%. He sells this bond ten years later. What is the rate of return on his investment, assuming yield to maturity does not change? OA. 4% OB. 4.8% OC. 6.4% D. 8%An investor purchases a 30-year, zero-coupon bond with a face value of $5,000 and a yield to maturity of 6.3%. He sells this bond ten years later. What is the rate of return on his investment, assuming yield to maturity does not change? OA. 3.78% OB. 6.3% OC. 5.04% OD. 3.15%Suppose the current yield on a one-year, zero coupon bond is 3%, while the yield on a six-year, zero coupon bond is 7%. Neither bond has any risk of default. Suppose you plan to invest for one year. You will earn more over the year by investing in the six-year bond as long as its yield does not rise above what level? A. 60% B. 7.82% C. 10.38% D. 9.1%