Question $15$

A $3\mathrm{.}5\%$ coupon Treasury bond with exactly $10-$ years to maturity is priced at $88\mathrm{.}31($per $100$

par value$).$ What is the yield to maturity $($YTM$)$ of the bond? $($Hint: all US Treasuries pay

coupon semi$-$annually$)$

$6\mathrm{.}5\%<mtext\; id="EditorElement\_4343233"></mtext><mi\; id="EditorElement\_4343234">Y</mi><mi\; id="EditorElement\_4343236">T</mi><mi\; id="EditorElement\_4343238">M</mi>$

Question $16$

You have just purchased $a10-$year zero$-$coupon bond with a yield $to$ maturity $of10\%.$ What

would your rate $of$ return $at$ the end $of$ the year $beif$ you sell the bond? Assume the yield $to$

maturity $on$ the bond $is11\%at$ the time you sell. $(Hint$: calculate the price $of$ the bond $(per$

$100$ par value$)at$ purchase, then one year later when rates have risen, assume interest

compounds semi$-$annually for this bond$)$

Return $0\%$

$0\%$ return $2\mathrm{.}5\%$

$2\mathrm{.}5\%$ return $5\mathrm{.}0\%$

$5\mathrm{.}0\%$ return$2\mathrm{.}0\%$

$5\mathrm{.}0\%$

$6\mathrm{.}5\%<mtext\; id="EditorElement\_4344150"></mtext><mi\; id="EditorElement\_4344151">Y</mi><mi\; id="EditorElement\_4344153">T</mi><mi\; id="EditorElement\_4344155">M</mi>$

Question $16$

You have just purchased $a10-$year zero$-$coupon bond with a yield $to$ maturity $of10\%.$ What

would your rate $of$ return $at$ the end $of$ the year $beif$ you sell the bond? Assume the yield $to$

maturity $on$ the bond $is11\%at$ the time you sell. $(Hint$: calculate the price $of$ the bond $(per$

$100$ par value$)at$ purchase, then one year later when rates have risen, assume interest

compounds semi$-$annually for this bond$)$

Return $0\%$

$0\%$ return $2\mathrm{.}5\%$

$2\mathrm{.}5\%$ return $5\mathrm{.}0\%$

$5\mathrm{.}0\%$ return