Econ | Chapter 4 Exercise.docx - Exercise Chapter 4 1 A \$1000-face-value bond has an 8 coupon rate its current price is \$950 and its price is expected

# Econ | Chapter 4 Exercise.docx - Exercise Chapter 4 1 A...

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Exercise Chapter 4 1. A \$1000-face-value bond has an 8% coupon rate, its current price is \$950, and its price is expected to increase to \$970 next year. Calculate the current yield, the expected rate of capital gain, and the expected rate of return. 2. If the interest rate is 5%, what is the present value of a security thatpays you \$105 next year and \$110.25 two years from now? If thissecurity sold for \$125, is the yield to maturity greater or less than 5%? 3. Would \$ 200, to be received in exactly one year, be worth more to youtoday when the interest rate is 9% or when it is 12%? Prove it. 4. Assume you just deposited \$1,000 into a bank account. The current #### You've reached the end of your free preview.

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• Winter '17
• Dr. bashar
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