Purchase Solution

What is the IRR of a ten-year bond with 6% annual coupon and 5% YTM?

Not what you're looking for?

Ask Custom Question

Suppose you purchase a ten-year bond with a 6% annual coupons. You hold the bond for four years and sell it immediately after receiving the fourth coupon. If the bond's yeild to maturity was 5% when you purchased and sold the bond.

a. What cash flows will you pay and receive from your investment in the bond per $100 face value?

b. What is the internal rate of return of your investment?

Purchase this Solution
Solution Summary

This solution shows what cash flows will you pay and receive from your investment in the bond per $100 face value in an attached Word and Excel file.

Solution Preview

See attached files.

Suppose you purchase a ten-year bond with a 6% annual coupons. You hold the bond for four years and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 5% when you purchased and sold the bond.

a. What cash flows will you pay and receive from your investment in the bond per $100 face value?

We need to calculate how much we are willing to pay for the bonds by using the formula as follows: -

where B is the issued price
C is the coupon payment
r is the discount or yield ...

Purchase this Solution
Free BrainMass Quizzes
Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

Organizational Behavior (OB)

The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.

Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

View More Free Quizzes
Related BrainMass Solutions

  • Calculating the price and YTM of the given bond

    495539 Calculate the bond price and YTM in the given case. A three-year bond has 8.0% coupon rate and a face value of $1000. (A).

  • Bond reinvestment of coupons; Yield to call; IRR for a 20 ye

    426118 Bond reinvestment of coupons; Yield to call; IRR for a 20 year bond held for 5 years a- What is the total future value dollar difference between reinvestment of coupons at the YTM of a bond selling at 98-5/8 with a coupon of 7% (paid semiannually

  • Calculating YTM and YTC

    237649 Yield to Maturity and Yield to Call Delta Industries has just issued callable ten-year, 8% coupon bonds with semi-annual coupon payments. The bonds can be called at par in four years or anytime thereafter on a coupon payment date.

  • Calculating the bond'd yield to maturity

    501584 What is the bond's yield to maturity? Tidewater Home Health Care, Inc. has a bond issue outstanding with eight years remaining to maturity, a coupon rate of 10 percent with interest paid annually, and a par value of $1,000.

  • Calculating YTM and YTC

    256777 Investor's YTM and YTC Laser Industries has just issued callable twelve-year, 6% coupon bonds with semi-annual coupon payments. The bonds can be called at 103 in four years or anytime thereafter on a coupon payment date.

  • Calculate IRR for investment in ten year, zero coupon bond

    395997 Calculate IRR for investment in ten year, zero coupone bond A ten-year, zero-coupon bond with a yield to maturity of 6% has a face value of $1000.

  • Determining Price of Bonds

    211759 Valuing bonds Finding the price of a 10 year pure discount bond paying $1000 at maturity if the YTM is 5%, 10% and 15% Also, the same company issued a bond with a par of $1000, time to maturity of 20 years, a coupon rate of 8% with semiannual

  • Finding YTM of a bond

    What annual rate of return would you expect to earn on the investment (i.e., what is the bond's YTM?)? a. 15.7 % b. 16.1 % c. 17.6 % d. 16.5 % e.

  • Bond yields

    The other method is to use the IRR function of excel. 12% coupon bonds, with 5 yrs left to maturity, bonds make annual payments, if the bond currentyly sells for $1,107.93 what is the YTM?

  • Calculating Investor's Yield to Maturity

    256962 Bond Concepts You are considering the purchase of Hytec bonds that were issued 14 years ago. When the bonds were originally sold, they had a 30-year maturity and a 14.375% coupon interest rate that is payable semiannually.

View More Related Solutions