Finance bonds-rate of return and price

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Reference no: EM131176546

Topic: Finance Bonds, Rate of Return, Price

(1) A bond with a Coupon Rate of 12% has a price of $108.25 (must multipy by 10) and makes its Coupon Payments on March 13 and September 13. Assume today is March 14, 1995 and the bond matures on September 12,1998. If interest rates stay constant, what is your annualized rate of return if you buy the bond at its quoted price, AND receive two semi-annual coupon payments and sell the bond at the end of a year? Assume a Face Value of $1000

(2) In order to buy the bond your broker charges you a premium over the current price such that the yield you will receive drops to 8.69%. What price do you pay?

(3) Suppose you sell the same bond one year later after interest rates rose 200 basis points. What was your Capital Gains Yield assuming you originally paid the quoted price of $108.25?

Reference no: EM131176546

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