About bond calculation? help~?

Your uncle has just inherited from your grand-father a 30-year Treasury bond that was
originally issued in 1987. This semi-annual coupon Treasury bond has a 8% annual
coupon rate, a $1,000 par value, and 10 years remaining until maturity. The current yield
to maturity on this bond is 7%.
(a) Your uncle plans to sell this bond to you today for $1,000. Should you take his offer?
(b) Now assume you bought this bond today for $1,000 from your uncle. You will keep
the bond for a year and then sell the bond to pay for graduate school based on the
market price at that time when the bond鈥檚 yield to maturity is 6.5%. At what price
would you sell this bond?
(c) What would be your one-year return on this investment (please consider the time
value of money)?

The 10-year Treasury Note (or Bond) price is $1071.10 today.
So....
a) you should buy the bond from your uncle for $1000
b) Sell at $1101.00. This would be the price of a 9-year Treasury with an 8% coupon rate (with semiannual coupons) and YTM of 6.5%.
c) Your uncle gave you a YTM of 8% when you purchased the bond. With YTM reaching 6.5% in 1-year your return on investment is 17.67%. Thank your uncle for selling you the bond so cheaply.

Tags

　　Business Investment 　　Business financing 　　Business Invest 　　Business Debt 　　Bond Investment 　　Angel Funds 　　Alternative Investment

Related information

Bond diversity without income?

This would be something very difficult to find, since the majority of bond investors do want income. You can look into zero interest bond funds that come due in 10 years. I think the IRS will im...

What's the best investment, an ISA or premium bonds?

It depends on your aims. Short term, say 3 years or less; a cash ISA . Longer term, a stock market ISA, of which there are different options available.(choices of sector, country, and risk level). ...

If the Dollar crashes what will happen to my bond funds?

all i can say is... invest in SLV. its a silver fund. it will keep going up as the dollar becomes worthless. or buy physical silver bullion.

...

Adding money to an Investment?

Mark, depending on what type of investment your planning. IRA, Roth IRA or savings. Many banks will offer an higher interest rate for some accounts that you need to keep a certain amount in that ...

Have you ever had a win on the premium bonds? How much is your investment?

A friends father put 拢10,000 in for a year and didn't win anything - I don't have anything like that amount in, but so far have won over 拢1,000, not a huge amount but it has been very wel...

Tough finance question dealing with rate of return, bond price and holding period yield?

You should post this on invesment, not insurance.

...

Which type of investment is best?

the STOCK MARKET is really one good source of making money. but there is really a DEFLATION worldwide so better invest only a smally amt. to roll over with. well, another best way is save and inves...

Please let me know the addresses of NHAI and REC for investment of capital gains tax bonds in mumbai and pune.

you can contact broker or can contact at me mumbai

...