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Cash flows are end-of-period Suppose that you purchased a bond with a 4.9 percent coupon rate for $930 today. The bond matures in ten years
Cash flows are end-of-period
Suppose that you purchased a bond with a 4.9 percent coupon rate for $930 today. The bond matures in ten years and makes semiannual coupon payments.
a. What rate of return, expressed as an APR, do you expect to earn on your investment if you plan to hold it until maturity?
b. Two years from now, the yield-to-maturity on your bond has declined by 1 percentage point, and you decide to sell. How much will you get for your bond?
c. What is the holding-period-yield (the IRR) on your investment? express it as an APR.
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