A 6.25 percent coupon bond with 22 years left to maturity is priced to offer a 5.5 percent yield to maturity. You believe that in one year, the yield to maturity will be 6.0 percent. (Assume interest payments are semiannual.) What would be the total return of the bond in dollars? What would be the total return of the bond in percent? Note: Negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round your final answer to 2 decimal places. Total return in dollars Total return in percentage
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Coupon = 6.25% annually → 3.125% semiannually = $31.25 per period. - Periodic yield now = 5.5%/2 = 2.75% = 0.0275. Periods remaining = 22 × 2 = 44. - Price formula: P0 = 31.25 * (1 - (1+0.0275)^(-44))/0.0275 + 1000*(1+0.0275)^(-44) - Numerically: P0 ≈ 792.00 + Show more…
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