Problem 7-36 Bond Prices and Interest Rate Changes (LG5) A 7.8 percent coupon bo
ID: 2769628 • Letter: P
Question
Problem 7-36 Bond Prices and Interest Rate Changes (LG5) A 7.8 percent coupon bond with 18 years left to maturity is priced to offer a 6.40 percent yield to maturity. You believe that in one year, the yield to maturity will be 7.0 percent.
What would be the total return of the bond in dollars? (Do not round intermediate calculations and round your final answer to 2 decimal places.) Total return $
What would be the total return of the bond in percentage? (Do not round intermediate calculations and round your final answer to 2 decimal places.) Total return %
Explanation / Answer
current bond price: Pv factor 6.40% PV Sami annual Interests 39 21.1950 826.61 Maturity 1000 0.3218 321.76 current bond price: 1148.37 compute the price in one year: Pv factor 7% PV Sami annual Interests 39 19.7007 768.33 Maturity 1000 0.3105 310.48 compute the price in one year: 1078.80 What would be the total return of the bond in dollars? =1078.8+78-1148.37 What would be the total return of the bond in percentage? 8.43/1148.37 .73%