20mg
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Suppose the following bond quotes for IOU Corporation appear in the financial page of today’s newspaper. Assume the bond has a face value of $1,000, makes semi-annual coupon payments, and the current date is October 31, 2017.
Company Ticker Coupon Rate Maturity Last Price (% of par) Last Yield Est Vol (000s) IOU 7.1 October 31, 2035 104.21 ??? 2,321 What is the yield to maturity on the bond?
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An investment offers a(n) 8.4% total return over the coming year. Bill Bernanke thinks the total real return on this investment will be only 7.4%. What does Bill believe the exact inflation rate will be over the next year?
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Lycan, Inc. has 6.4% coupon bonds on the market that have 19 years left to maturity. The bonds make annual payments. If the YTM on these bonds is 8.4%, what is the current bond price?
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Suppose you buy a 10% coupon, 30-year bond today when it's first issued. If interest rates suddenly drop to 5%, what happens to the price of your bond?
The price will rise. The price will fall. The price will not change. 0
Current Yield & Yield to maturity
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Suppose the following bond quotes for IOU Corporation appear in the financial page of today’s newspaper. Assume the bond has a face value of $1,000, makes semi-annual coupon payments, and the current date is October 31, 2017.
What is the current yield on the bond given in the quote (for IOU Corporation)?