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Unformatted text preview: (Ignore tax considerations) b) Find the realized compound yield before taxes for a 2year holding period, assuming (1) you sell the bond after 2 years, (2) the bond yield is 7% at the end of the second year and (3) the coupon can be reinvested for 1 year at a 3% interest rate. Q4. A convertible bond has the following features: Coupon: 5.25% Maturity: June 15, 2007 Market Price of Bond: $775.00 Market Price of Underlying Common Stock: $28.00 Annual Dividend: $1.20 Conversion Ratio: 20.83 shares Calculate the conversion premium for this bond. Q5. Heres a breakdown of payments for a TIPS with a coupon rate a 4%: Time Inflation Par Value Coupon Payment Principal Repayment Total Payment 1000.0 1 2% 1020.00 40.80 40.80 2 3% 1050.60 42.02 42.02 3 1% 1061.11 42.44 1061.11 1103.55 What were the real and nominal rates of return in years 1, 2, and 3?...
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 Fall '11
 JohnHartman

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