Maurice Tutor

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    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 18 Aug 2017 My Price 8.00

zero-coupon bonds

Prices of zero-coupon bonds reveal the following pattern of forward rates:

Year Forward Rate
1 5%
2 7   
3 8   
 

   

In addition to the zero-coupon bond, investors also may purchase a 3-year bond making annual payments of $45 with par value $1,000.

  

a.

What is the price of the coupon bond?(Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

  

  Price $   

  

b.

What is the yield to maturity of the coupon bond? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "%" sign in your response.)

  

  Yield to maturity %  

  

c.

Under the expectations hypothesis, what is the expected realized compound yield of the coupon bond?(Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "%" sign in your response.)

  

  Realized compound yield %  

   

d.

If you forecast that the yield curve in 1 year will be flat at 8.0%, what is your forecast for the expected rate of return on the coupon bond for the 1-year holding period? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "%" sign in your response.)

  

  Holding period return %  

Answers

Maurice Tutor
(5)
Status NEW Posted 18 Aug 2017 11:08 PM My Price 8.00

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