Reference no: EM131312273
The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY).
a. Suppose that today you buy a bond with an annual coupon of 11 percent for $1,130. The bond has 18 years to maturity. What rate of return do you expect to earn on your investment? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Expected rate of return %
b-1. Two years from now, the YTM on your bond has declined by 1 percent, and you decide to sell. What price will your bond sell for? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)
Bond price $
b-2. What is the HPY on your investment? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
HPY %
|
Economy motel chain
: Red Lodges is the owner of an economy motel chain. Red Lodges is considering building a new 200-unit motel. The estimated cost to build the motel is $8,000,000; Red Lodges estimates furnishings for the motel will cost an additional $700,000 and will ..
|
|
Determine which mutually exclusive water purification option
: Blue Electronics is considering the purchase of a water filtration system to assist in circuit board manufacturing. The system costs $40,000. It has an expected life of 7 years at which time its salvage value will be $7,500. The estimated operating a..
|
|
Analysis of preventative measures
: Perception of Enron Pre-2000 - Why was Enron such an admired company prior to 2000? Reason for Enron’s Failure - Why did the company fail? Analysis of Preventative Measures - Why were the company’s internal checks and balances and incentive systems u..
|
|
What is the profitability index for an investment
: What is the profitability index for an investment with the following cash flows given a 9 percent required return?
|
|
Expected rate of return and holding period yield
: The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). Suppose that today you buy a bond wit..
|
|
What is discounted payback period
: A project has an initial cost of $8,800 and produces cash inflows of $2,700, $5,000, and $1,600 over the next three years, respectively. What is the discounted payback period if the required rate of return is 7 percent?
|
|
Income tax-the average per share price of the stocks
: On June 29, 2001, Harry bought 100 shares of PG at 65. On May 29, 2002, PG issued 4 shares of SJM to Harry in a spin-off The average per share price of the stocks on that day were: PG 87.88; SJM 31.84. To the nearest dollar, What is Harry's basis in ..
|
|
Whats your portfolio return
: At the beginning of the month, you owned $6,000 of News Corp, $9,000 of First Data, and $5,000 of Whirlpool. The monthly returns for News Corp, First Data, and Whirlpool were 8.80 percent, −2.67 percent, and 10.93 percent. What’s your portfolio retur..
|
|
What is npv of financing due to potential bond mispricing
: You sell a bond for $11M. This bond has a 20-year maturity, a face value of $10M, a beta of 0.10, and promises an annual coupon payment of 5 percent of the face value. Assume a risk-free rate of 4 percent and a market risk premium of 6 percent. What ..
|