FBE441_Homework_5 - 8 what would your annual total rate of...

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USC - MARSHALL SCHOOL OF BUSINESS FBE 441 Investments – P. Matos – Spring 2010 Homework Assignment #5 – due: Wednesday, April 28 1. A coupon bond pays interest of $100 annually has a face value of $1,000, matures in 5 years, and is selling today at $928 (at a discount from “par value”). What is the yield to maturity on this bond? 2. You purchased an annual interest coupon bond one year ago that had 6 years remaining to maturity at that time. The coupon interest rate was 10% and the par value was $1,000. At the time you purchased the bond, the yield to maturity was 8%. If, one year later, you sold the bond after receiving the first interest payment and the yield to maturity continued to be
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Unformatted text preview: 8%, what would your annual total rate of return on holding the bond be for that year? Explain. 3. The following zero coupon bonds are currently actively traded in the bond market (all have a face value = $1000): Maturity (years) Price 1 909.09 2 811.62 3 711.78 4 635.52 Calculate the yield to maturity for each of these 4 bonds. What is the term structure of interest rates implied by these prices? 4. What is the duration of a bond trading at $1,000 (meaning it is trading at face value or “at par”) if its coupon rate is 8% and has a remaining time to maturity of 5 years?...
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