th a 11 are is ht to cal a prem est rates onds wit 12% b s worth e new mo ey for IB Typically, if a bond's YTM is greater than coupon rate, this bond's price will be priced at . 1) discount 2) none of the other three choices 3) par value 4) premium
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YTM is the total return anticipated on a bond if it is held until it matures, while the coupon rate is the annual interest rate that the issuer pays to the bondholder. Show more…
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Consider a 5-yr annual coupon bond with a coupon rate of 8%, and a market price of 93.6889. Assume that spot rates of 3%, 4%, 5%, 6%, and 7% for r(1) to r(5). (A) Extrapolate one-period forward rates for 1 to 4 years from today, i.e., work out f(1,1), f(2,1); f(3,1), and f(4,1) (B) What is the YTM for the bond? (C) If the bond is priced with forward rates computed above, what will be the annualized rate of return? (D) Compare the annualized rate of return computed with the forward rates and the YTM, why they are different?
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One bond has a coupon rate of $8 \%$, another a coupon rate of $12 \%$. Both bonds pay interest annually, have 10-year maturities, and sell at a yield to maturity of $10 \%$. (LO6-2) a. If their yields to maturity next year are still $10 \%$, what is the rate of return on each bond? b. Does the higher-coupon bond give a higher rate of return over this period?
Q. consider the following $1,000 par value zero-coupon bonds: Bond Years to Maturity YTM A 1 3% B 2 4% C 3 5% D 4 6% a. What is the expected 1-year interest rate in the 3rd year? b. What will be the price of the 2-year zero-coupon bond after 2 years? c. Suppose, next year, you consider buying 3-year zero-coupon bond and holding it for 2 years. What will be the realized compound return?
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