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Suppose you purchase a 1 0 - year bond with 6 . 6 4 % annual coupons. You hold the bond for 4 years ,
Suppose you purchase a year bond with annual coupons. You hold the bond for years and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was when you purchased and sold the bond,
a what cash flows will you pay and receive from your investment in the bond per $ face value?
b what is the annual rate of return of your investment?
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Part
a What cash flows will you pay and receive from your investment in the bond per $ face value?
The cash flows from the investment are shown in the following timeline:Round to the best choice below.
A
The timeline starts at Year and ends at Year The timeline shows a cash flow of in Year and a cash flow of each year from Year to Year In Year the cash flow is
Years
Cash Flows$ $ $ $ $
B
The timeline starts at Year and ends at Year The timeline shows a cash flow of minus in Year and a cash flow of each year from Year to Year In Year the cash flow is
Years
Cash Flowsnegative $ $ $ $ $
C
The timeline starts at Year and ends at Year The timeline shows a cash flow of minus in Year and a cash flow of each year from Year to Year In Year the cash flow is
Years
Cash Flowsnegative $ $ $ $ $
Your answer is correct.D
The timeline starts at Year and ends at Year The timeline shows a cash flow of in Year and a cash flow of each year from Year to Year In Year the cash flow is
Years
Cash Flows$ $ $ $ $
Part
b What is the annual rate of return of your investment?
The annual rate of return of your investment is
enter your response hereRound to two decimal places.A BBBrated corporate bond has a yield to maturity of A US Treasury security has a yield to maturity of These yields are quoted as APRs with semiannual compounding. Both bonds
pay semiannual coupons at a rate of and have years to maturity.
a What is the price expressed as a percentage of the face value of the Treasury bond?
b What is the price expressed as a percentage of the face value of the BBBrated corporate bond?
c What is the credit spread on the BBB bonds?
a What is the price expressed as a percentage of the face value of the Treasury bond?
The price of the Treasury bond as a percentage of face value is Round to three decimal places.
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