What is the yield to maturity

Assignment Help Finance Basics
Reference no: EM132185170

Question - You have been hired as an intern at a major investment firm. Your superior then gives you the following bonds to analyze.

A. Corporate bond with a face value of $1,000 that matures in 4 years with annual coupon rate of 4% and yield to maturity of 4%.

B. A risk-free bond that pays one coupon of $250 each year with a face value of $1,000 in 3 years.

C. A zero-coupon bond with a face value of $5,000 that matures in one year with a yield to maturity of 20 %.

The current on year interest rate is 1%. It is also known with certainty that the one-year risk free rate will be 2% the following year, and 3% the year after

a. For each product, what is the purchase price?

b. The issuer of the zero-coupon bond told you that there is half probability that it only repay back $3,000 to the investors. What is the yield to maturity and the expected return on that bond?

c. Suppose you buy the Bond A today. After two years, the interest rates fall and the yield to maturity decreases to 2.5%, what would be your annualized holding period if you decide to sell the bond after two years?

Reference no: EM132185170

What is chris'' return on the stock option

Return on Stock Options. Chris purchased a call option on a stock for $200. The option gives him the right to purchase the stock at $30 per share until May 1st. On May 1st,

Present value of an ordinary annuity

On January 1, 2015, Day Corp. entered into a 10-year lease agreement with Ward, Inc. for industrial equipment. Annual lease payments of $10,000 are payable at the end of eac

What is the addition to retained earnings

Gallagher's Supply has sales of $387,000 and costs of $294,500. The depreciation expense is $43,800. Interest paid equals $18,200 and dividends paid equal $6,500. The tax ra

Unbiased expectations hypothesis

The Wall Street Journal reports that the rate on two year Treasury securities is 2.10% and the rate on four year Treasury securities is 3.05%.

What is the bond worth today

Wilson owns a bond with a coupon of 6%. He bought it when the current yield was 7%. The current yield is now 5%. How much did he pay for the bond? What is the bond worth tod

The physical damage to the parked car

Pablo traded in his 2000 Ford for a new Ford. One week later, he hit an oily spot in the road on his way to work and skidded into a parked car. The 2000 Ford was insured und

Calculation of current selling price of a bond

A 10-year Treasury bond with a $1,000 par value has a 12% coupon and pay interest every 6 months. The bond is three years old and has just made its sixth payment. If interes

Estimate rio required rate of return

1. Calculate the future sums of the following two schemes. Each makes contributions of $400 per month over 40 years. One is invested in a balanced portfolio that earned on ave

Reviews

Write a Review

 
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd