Question
PLEASE provide an answer for this exercise using an excel table: If the first bond in exercise 1 has a yield to maturity of 8%
PLEASE provide an answer for this exercise using an excel table:
If the first bond in exercise 1 has a yield to maturity of 8% one year from now, what will its price be?
What will be the rate of return on the bond?
If the inflation rate during the year is 3%, what is the real return on the bond?
Here is exercise 1:
One bond has a coupon rate of 8%, another a coupon of 12%. Both bonds have 10-year maturities and sell at a yield to maturity of 10%. If their yields to maturity next year are still 10%, what is the rate of return on each bond? Does the higher coupon bond give a higher rate of return?
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