You purchase a 6year maturity annual payment bond that has a 5 percent coupon and a 7
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You purchase a 6‐year maturity annual payment bond that has a 5 percent coupon and a 7 percent yield. If your investment horizon is 5 years find the bond’s potential return if interest rates fall to 6.5 percent immediately and again if interest rates rise immediately to 7.5 percent. Use the bond’s duration to explain why the two potential returns differ.
CouponA coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...
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Financial Institutions, Markets And Money
ISBN: 1704
12th Edition
Authors: David S. Kidwell, David W. Blackwell, David A. Whidbee, Richard W. Sias
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