An investor buys a 25-year, 10% annual pay bond for $900 and will sell the bond in 5 years when he estimates its yield will be 9%. The price for which the investor expects to sell this bond is closest to:
A) $964.
B) $1,122.
C) $1,091.
How did u calculate yaar
@iwantgovtjob
Two ways :
1. Current yield is 11.something (N=25,PMT=100,PV=-900,FV=1000,I/Y = CPT)
Now we can see that price have to go up since the yield has reduced to 9%. The amount of reduction is not very big(only 2%) which can increase the price to 1122 so answer should be 1091.
2. What we have to calculate is the price of the bond after 5 years. Take this scenario 5 years in future. Now N=20,I/Y=9%,PMT=100,FV=1000 hence PV = 1091.something..
Hope it makes sense
Prateek
can u explain why is YTM? YTC and YTP>YTM
Yield to maturity > yield to call why ?
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An investor gathers the following information about three U.S. Treasury annual coupon bonds:
Bond #1 Bond #2 Bond #3
Maturity 2-year 1-year 2-year
Price $10,000 $374.62 $9,560
Coupon 4% 0% 0%
Par Value $10,000 $400 $10,400
Given the above information, how can the investor generate an arbitrage profit?
A) No arbitrage profit exists.
B) Purchase bond #1 while selling bonds #2 and #3.
C) Purchase bonds #2 and #3 while selling bond #1.
guys i wanted to know that is there need of coaching classes for cfa l1 or self study is sufficient???? and if yes for coachingcan u plz tell me good coaching classes in pune...which notes should i refer schweser or cfa institute material or any other??
Hie
I was working on some finance stuff and got struck...if you can help me with this question
Q. XYZ €™s revenues this past year were $250,000 and total costs were $150,000; and both costs and revenues have been expected to remain the same in perpetuity. XYZ is an all equity firm (i.e., it has no debt), with a return on assets of 10%, and has 100,000 shares outstanding. XYZ currently pays out all its earnings as dividends (100% payout) and has been expected to do so forever. The dividends on the basis of last year €™s earnings have just been paid out. Unknown to the market, a team of researchers and the President of XYZ suddenly discover that the firm can introduce a range on new products and start expanding the market and increase earnings. However, this expansion will also increase costs and the company will be unable to pay out all the earnings as dividends. The President and her financial team have come up with two growth alternatives. (I) Grow earnings at an annual rate of 5% forever, but reduce the payout to 70% forever. No other financing will be necessary apart from this plowback (or reduction in payout). (II) Grow earnings at an annual rate of 8%, but with a reduction in payout to only 40%. Again no other financing will be necessary apart from this plowback. By how much will the price per share of the firm increase (in dollars) if it adopts the right strategy of growth?
For the past three years, Acme Corp. has generated the following sample returns on equity (ROE): 4%, 10%, and 1%. What is the sample variance of the ROE over the last three years?
A) 21.0(%2).
B) 21.0%.
C) 4.6%.
What is the effective annual yield of a T-bill that has a money market yield of 5.665% and 255 days to maturity?
A) 5.92%.
B) 5.79%.
C) 4.01%.
An investor forms a portfolio by investing $3,000 in the stock of Lovebirds Company and $7,000 in the stock of Lories, Inc. His investment advisor calculates the following joint probabilities of the returns of the two stocks.
Joint Probabilities
RLories = 0.12
RLories = 0.08
RLovebirds = 0.20
0.35
0
RLovebirds = 0.05
0
0.65
The approximate portfolio expected return and variance are closest to:
Expected return Variance
A) 9.65% 0.00236
B) 9.65% 0.00121
C) 10.25% 0.00121
I have the same problem with you but I realy do not know how to sovle it. If you've already got it, please share it to me. Thanks.
Carlos Rodriquez, CFA, and Regine Davis, CFA, were recently discussing the relationships between capital structure, capital budgets, and net present value (NPV) analysis. Which of the following comments made by these two individuals is least accurate?
A) “For projects with more risk than the average firm project, NPV computations should be based on the marginal cost of capital instead of the weighted average cost of capital.”
B) “The optimal capital budget is determined by the intersection of a firm's marginal cost of capital curve and its investment opportunity schedule.”
C) “A break point occurs at a level of capital expenditure where one of the component costs of capital increases.”
C)
Hi
Please tell some website to download CFA L 1official books in Pdf from so that can printout can be taken
Hi guys, anyone has shwesers video for the derivs reading 63
guys plz plz help.i have a macbook and want question bank .so plz give me the proper link from where i can download for my macbook or if u ve one plz mail me at [email protected]