A 30-year maturity bond has a 6.3% coupon rate, paid annually. It sells today for $868.67. A 20-year maturity bond has 5.8% coupon rate, also paid annually. It sells today for $884.5. A bond market analyst forecasts that in 5 years, 25-year maturity bonds will sell at yields to maturity of 7.3% and 15-year maturity bonds will sell at yields of 6.8%. Because the yield curve is upward sloping, the analyst believes that coupons will be invested in short-term securities at a rate of 5.0%. What rate of return does each bond offer over the 5-year period?(Round your answers to 2 decimal places. Omit the "%" sign in your response.)
Rate of Return
30 year bond %
20 year bond %
Answers: 1
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You are the owner of a local honda dealership. unlike other dealerships in the area, you take pride in your “no haggle” sales policy. last year, your dealership earned record profits of $1.5 million. however, according to the local chamber of commerce, your earnings were 10 percent less than either of your competitors. in your market, the price elasticity of demand for midsized honda automobiles is 4.5. in each of the last five years, your dealership has sold more midsized automobiles than any other honda dealership in the nation. this entitled your dealership to an additional 30 percent off the manufacturer’s suggested retail price (msrp) in each year. taking this into account, your marginal cost of a midsized automobile is $11,000. what price should you charge for a midsized automobile if you expect to maintain your record sales?
Answers: 1
A 30-year maturity bond has a 6.3% coupon rate, paid annually. It sells today for $868.67. A 20-year...
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