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Essay Available:
Pages:
1 page/≈275 words
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Style:
APA
Subject:
Mathematics & Economics
Type:
Math Problem
Language:
English (U.S.)
Document:
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Date:
Total cost:
$ 4.32
Topic:

Money and Banking

Math Problem Instructions:

In year 0 you bought a 3 year 20% coupon bond with face value 1000 at price 1000. What is the bond’s YTM? In year 1, with 2 years remaining until maturity, you sell the bond. The current interest rate is now 10% and it is expected to remain at that level forever, i.e. newly issued 2 year bonds have a coupon rate of 10%. At what price can you sell your bond and what is the holding period yield (you hold it between year 0 and year 1). How does the holding return compare with your bond’s YTM ?

Math Problem Sample Content Preview:

Money and banking
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In year 0 you bought a 3 year 20% coupon bond with face value 1000 at price 1000. What is the bond’s YTM? In year 1, with 2 years remaining until maturity, you sell the bond. The current interest rate is now 10% and it is expected to remain at that level forever, i.e. newly issued 2 year bonds have a coupon rate of 10%. At what price can you sell your bond and what is the holding period yield (you hold it between year 0 and year 1). How does the holding return compare with your bond’s YTM ?-
[A] Current price/ market value- 1,000
Face value/ Par value- 1,000
Annual rate/ coupon rate- 20%
Maturity in years- 3 years
PMT=20%*1,000=200
YTM=PMT+ (F-P)/...
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