Answered

Welcome to Westonci.ca, the ultimate question and answer platform. Get expert answers to your questions quickly and accurately. Connect with a community of experts ready to provide precise solutions to your questions quickly and accurately. Discover detailed answers to your questions from a wide network of experts on our comprehensive Q&A platform.

You buy a bond for $985 that has a coupon rate of 5.50% and a maturity of 8-years. A year later, the bond price is $1,160. (Assume a face value of $1,000 and annual coupon payments.) What is your rate of return over the year?

Sagot :

KoiPyallKalomuje

Answer:

$1051.51

Step-by-step explanation:

[tex] \in[/tex]

Explanation:

Coupon rate 10%

Face value = $1,000

Yield to maturity = 8%

Annual coupon will be:

= Face value × Coupon rate

= 1000 × 10%

= 100

Therefore, the price of bond will be:

= Annual coupon × Present value of annuity factor + $1000 × Present value of the discounting factor

= (100 x 2.5771) + (1000*0.7938)

= 257.71 +793.8

= $1051.51 =

The price of the bond is $1051.51

Thanks for using our platform. We're always here to provide accurate and up-to-date answers to all your queries. We hope our answers were useful. Return anytime for more information and answers to any other questions you have. We're glad you visited Westonci.ca. Return anytime for updated answers from our knowledgeable team.