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Problem 6-25 Suppose you purchase a 30-year, zero-coupon bond with a yield to maturity of 6%. You hold the bond for five years before selling
Problem 6-25 Suppose you purchase a 30-year, zero-coupon bond with a yield to maturity of 6%. You hold the bond for five years before selling it. Note: assume S100 face value. a. If the bond's yield to maturity is 6% when you sell it, what is the annualized rate of return ofyour b. If the bond's yield to maturity is 7% when you sell it, what is the annualized rate of return of your c. If the bond's yield to maturity is 5% when you sell it, what is the annualized rate of return ofyour d. Even if a bond has no chance of default, is your investment risk free if you plan to sell it before it investment? investment? investment? matures? Explain. Maturity (years) Face value Yield to maturity Holding period (years) 30 100 6% a. If the bond's yield to maturity is 6% when you sell it, what is the annualized rate of return ofyour investment? Purchase price Maturity when sold (years) Bond price when sold Rate of returm
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