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...

This preview shows page 1 out of 1 page.

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
Image of page 1

You've reached the end of your free preview.

Want to read the whole page?

  • Winter '17
  • Dr. bashar

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes