4. Suppose that Jenna just bought a newly issued 15-year bond with a coupon rate equal to 7%. If Jenna sells the bond at the end of the year when the market price is $917, what would be the bond's yield to maturity? What return would she earn? What portion of the return represents capital gains and what portion represents the current yield? 5. Suppose that James just bought the same 15-year bond that Jenna bought and at the same time. If James sells his bond five years from the day he purchased it (with 10 years remaining to maturity) for $1,074, what would be the bond's yield to maturity when he sells it? What return would he earn during the time he held the bond? What portion of the return represents capital gains and what portion represents the current yield? 50 points possible (10 points for each question) File Home Insert Page Layout Formulas Data Review View Help C53 9% G 0 B D E H 46 $1,000.00 47 48 Questions 4-5 49 50 INPUT DATA: KEY OUTPUTS: 51 52 Original maturity (years) 15 Yields to new investor (buyer) 53 Coupon rate of interest 9% Yield to maturity, id 9.00% 54 Interest payments per year 2 Market price one year after sale $1,000.00 55 Maturity value $1,000 Dollar capital gains next year $0.00 56 Market rate, YTM 10.00% Capital gains yield next year 0.00% 57 Purchase price $923.14 Current yield next year 9.00% 58 Selling price $1,000.00 Total yield next year 9.00% 59 Number of years held 3 60 Yields to the original investor (Assumes the market rate, YTM, remains the same each year the bond is held as when the bond 61 was purchased, except in the final year.) # Years Bond Beginning of Year End of Year Capital Gains Capital Gains Current Yield Total Yield 63 was Held Value (S) Value (S) (S) Yield (%) Interest ($) (%) (%) 64 1 $923.14 $925.51 $2.37 0.26% $90 9.75% 10.01% 2 $925.51 $928.12 $2.61 0.28% $90 9.72% 10.01% 66 3 $928.12 $1,000.00 $71.88 7.74% $90 9.70% 17.44% 67 4 68 5 69 70 INSTRUCTIONS 62 65 C06 GRAPH Calculate Type here to search i 4. Suppose that Jenna just bought a newly issued 15-year bond with a coupon rate equal to 7%. If Jenna sells the bond at the end of the year when the market price is $917, what would be the bond's yield to maturity? What return would she earn? What portion of the return represents capital gains and what portion represents the current yield? 5. Suppose that James just bought the same 15-year bond that Jenna bought and at the same time. If James sells his bond five years from the day he purchased it (with 10 years remaining to maturity) for $1,074, what would be the bond's yield to maturity when he sells it? What return would he earn during the time he held the bond? What portion of the return represents capital gains and what portion represents the current yield? 50 points possible (10 points for each question) File Home Insert Page Layout Formulas Data Review View Help C53 9% G 0 B D E H 46 $1,000.00 47 48 Questions 4-5 49 50 INPUT DATA: KEY OUTPUTS: 51 52 Original maturity (years) 15 Yields to new investor (buyer) 53 Coupon rate of interest 9% Yield to maturity, id 9.00% 54 Interest payments per year 2 Market price one year after sale $1,000.00 55 Maturity value $1,000 Dollar capital gains next year $0.00 56 Market rate, YTM 10.00% Capital gains yield next year 0.00% 57 Purchase price $923.14 Current yield next year 9.00% 58 Selling price $1,000.00 Total yield next year 9.00% 59 Number of years held 3 60 Yields to the original investor (Assumes the market rate, YTM, remains the same each year the bond is held as when the bond 61 was purchased, except in the final year.) # Years Bond Beginning of Year End of Year Capital Gains Capital Gains Current Yield Total Yield 63 was Held Value (S) Value (S) (S) Yield (%) Interest ($) (%) (%) 64 1 $923.14 $925.51 $2.37 0.26% $90 9.75% 10.01% 2 $925.51 $928.12 $2.61 0.28% $90 9.72% 10.01% 66 3 $928.12 $1,000.00 $71.88 7.74% $90 9.70% 17.44% 67 4 68 5 69 70 INSTRUCTIONS 62 65 C06 GRAPH Calculate Type here to search