Ask Question
17 February, 01:07

You want to buy a Disney bond with two years until maturity and a coupon rate of 9.50% per year, paid semiannually. FED reports that the market interest rate for similar bonds is only 3.8% per half-year. Find the bond's price today and 6 months from now after the next coupon is paid. (Do not round intermediate calculations. Round your answers to 2 decimal places.) - Current price $-Price after 6 months $ - What is the total rate of return on the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Total rate of return % per six months

+3
Answers (1)
  1. 17 February, 03:58
    0
    n=2*2=4

    Coupon = 0.095*1000/2=47.50

    rate = 0.038

    Using excel:

    =PV (0.038,4,47.5,1000)

    =$1,034.65

    Price after 6 months:

    n=3

    Coupon = 0.095*1000/2=47.50

    rate = 0.038

    =PV (0.038,3,47.5,1000)

    =$1,026.46

    Capital gain return:=1026.46/1034.65=-0.791%

    Coupon return = 47.5/1034.65

    =+4.591%

    Total return = 3.80%
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “You want to buy a Disney bond with two years until maturity and a coupon rate of 9.50% per year, paid semiannually. FED reports that the ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers