Your father paid - if a bond is selling at a discount the...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Your father paid $10,000(CF at t=0) for an investment that promises to pay $750 at the end of each of the next five years, then an additional lump sum payment of 10,000 at the end of the fifth year. What is the expected rate of return on this investment? suppose a state of new york bond will pay 1,000 10 years from now. if the going interest rate on these 10 year bonds is 5.5% how much is the bond worth today
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: if a bond is selling at a discount, the yield to call is a better measure of return than the yield to maturity Assume that investors have recently become more risk averse, so the market risk premium has increased. Also, assume that the risk-free rate and expected inflation have not changed. What will happen?...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online