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malfutka [58]
2 years ago
8

5. An investor is interested in purchasing a 30-year U.S. government bond carrying an 8 percent coupon rate. The bond’s current

market price is $935 for a $1000 par value instrument. Suppose the investor sells the bond at the end of 13 years for $970. What is the holding-period yield? What is the effective yield?
Business
1 answer:
ella [17]2 years ago
5 0

Answer:

Holding period yield is 114.97%

effective yield is 8.72%

Explanation:

holding period yield=(Price at call-initial price+coupon payments)/initial price

                                =($970-$935)+(13*$80)/$935

                                 =($35+$1040 )/$935

                                 =$1075/$935

                                  =114.97%

The effective yield is the yield to call which can be computed using the excel rate formula:

=rate(nper,pmt,-pv,fv)

nper is the number of payments before the call which is 13

pmt is the periodic payment by bond which is $1000*8%=$80

pv is the current market price of $935

fv is the bond price at end of 13 years at $970

=rate(13,80,-935,970)

rate=8.72%

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If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 unit
Ksenya-84 [330]

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-0.33

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Answer: <em><u>Cash to be distributed to  Harding = $ 17000,  Jones = $ 3000 </u></em>

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