An investor is considering the purchase of a(n) 6.000 %, 15-year corporate bond that's being priced to yield 8.000%. She thinks that in a year, this bond will be priced in the market to yield 7.000 % . Using annual compounding, find the price of the bond today and in 1 year. Next, find the holding period return on this investment, assuming that the investor's expectations are borne out.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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An investor is considering the purchase of a(n) 6.000%, 15-year corporate bond that's being priced to yield
8.000%. She thinks that in a year, this bond will be priced in the market to yield 7.000 % . Using annual
compounding, find the price of the bond today and in 1 year. Next, find the holding period return on this
investment, assuming that the investor's expectations are borne out.
Transcribed Image Text:An investor is considering the purchase of a(n) 6.000%, 15-year corporate bond that's being priced to yield 8.000%. She thinks that in a year, this bond will be priced in the market to yield 7.000 % . Using annual compounding, find the price of the bond today and in 1 year. Next, find the holding period return on this investment, assuming that the investor's expectations are borne out.
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