If you pay $1200 today for a new $1000 face value two-year bond with a 8%...

Question

Question

If you pay $1200 today for a new $1000 face value two-year bond with a 8% coupon rate, your rate of return, or yield to maturity is
1. 8%
2. More than 8%
3. Less than 8%
4. Need more information to calculate
Base on the Pure Expectations Theory of interest rates, if the one-year rate is 4%, and the one-year rate, one year from now, is expected to be 10% the current two-year rate should be
1. 7%
2. 3%
3. 6%
4. 14%
If you pay $1000 today for a new $1000 face value two-year bond with a 5% coupon rate, your rate of return, or yield to maturity is
1. 5% (1000 x .05 = 50 = 5% per year
2. More than 5%
3. Less than 5%
4. Need more information to calculate

business finance

Answer 1

Answer #1

correct option is lie less than 8% Yield = Coupon - 30 - 6.6t. rice 1200

Answer 2

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