HW3 Question

HW3 Question - these rates to equal? Why? Now, answer all...

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Homework Assignment #3 1. Consider a coupon bond that has 32 years to maturity and has a coupon rate of 12 percent. The current required rate of return on this particular type of security is 10.5%. Calculate the expected current yield and the expected capital gain/loss for this security. Explain the relationship of the size of these returns to each other for this specific case. What do you expect the sum of
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Unformatted text preview: these rates to equal? Why? Now, answer all of the above questions if everything were the same except the required rate of return is 13%. 2. Create a data table which tests the sensitivity of the bond price above to maturity and YTM (as discussed in class). Look at maturity values of 32, 25, 20, 10 and 3 years. Use as YTM values 15%, 13%, 12%,10% and 5%....
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This note was uploaded on 12/07/2009 for the course FIRE 312 taught by Professor Salandro during the Spring '09 term at VCU.

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