Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

7. Consider a bond paying a coupon rate of 10% per year semiannually when the market interest rate is only 4% per half year. The bond has three year until maturity.
(a) Find the bond's price today and six months from now after the next coupon is paid.
(b) What is the total (six month) rate of return on the bond?

8. Assume you have one-year investment horizon and are trying to choose among three bonds. All have the same degree of default risk and mature in 10 years. The first is a zero-coupon bond that pays $1000 at maturity. The second has an 8% coupon rate and pays the $80 coupon once per year. The third has a 10% coupon rate and pays the $100 coupon once per year.
(a) If all three bonds are now priced to yield 8% to maturity. What are their prices?
(b) If you expect their yield to maturity to be 8% at the beginning of next year, what will their prices be then? What is your before-tax holding period return on each bond? If your tax bracket is 30% on ordinary income and 20% on capital gains income, what will your after-tax rate of return be on each?
(c) Refind out your answer to (b) under the assumption that you expect the yields to maturity on each bond to be 7% at the beginning of next year.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M924943

Have any Question? 


Related Questions in Basic Finance

Assignmentcalculate the solutions to the following problems

Assignment Calculate the solutions to the following problems. YOU MUST SHOW YOUR WORK. 1. Low Tech Company has an expected ROE of 10%. The dividend growth rate will be ________ if the firm follows a policy of paying 40% ...

If prices and wages always change by exactly the same

If prices and wages always change by exactly the same percentage and are expected always to do so, how is the short- run aggregate supply curve shaped? Make an argument that in this case, there is no such thing as a shor ...

An investor has a cash of 10000000 at disposal he wants to

An investor has a cash of $10,000,000 at disposal. He wants to invest in a bond with $1,000 nominal value and whose dirty price is equal to 107.457%. 1. What is the number of bonds he will buy? 2. Same question if the no ...

Explain the market conditions under which fundamental

Explain the market conditions under which fundamental analysis can lead to abnormal return.

Activity instructionchoose a country not the united states

Activity Instruction Choose a country (not the United States or Canada) that has not already been chosen by another learner and post your country choice in the discussion area. Then, identify some political and currency ...

At the end of 2011 home depots total capitalization

At the end of 2011 Home Depot's total capitalization amounted to $28,992 million. In 2012 debt investors received interest income of $635 million. Net income to shareholders was $4,526 million. (Assume a tax rate of 35%. ...

Investor a makes a cash purchase of 100 shares of abampc

Investor A makes a cash purchase of 100 shares of AB&C common stock for $45 a share. Investor B also buys 100 shares of AB&C but uses margin. Each holds the stock for one year, during which dividends of $4 a share are di ...

Mutual fund assignmentdue date september 15 2016pick a

Mutual Fund Assignment(Due date: September 15, 2016) Pick a Mutual Fund of your choice. Visit the web site and learn about your chosen fund whatever you want to learn. Write a report, a page or so, explaining the main fe ...

What are the two major provisions of the mcfadden actwhat

What are the two major provisions of the McFadden Act? What was the motivation behind its passage?

Suppose there is an unexpected slowdown in the rate of

Suppose there is an unexpected slowdown in the rate of productivity growth in the economy so that forecasters consistently overestimate the growth rate of GDP. If the central bank bases its policy decisions on the consen ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate