Long-term Treasury bonds currently are selling at yields to maturity of nearly 6%. You expect interest rates to fall. The rest of the market thinks that they will remain unchanged over the coming...


Long-term Treasury bonds currently are selling at yields to maturity of nearly 6%. You expect interest rates to fall. The rest of the market thinks that they will remain unchanged over the coming year. In each question, choose the bond that will provide the higher holding-period return over the next year if you are correct. Briefly explain your answer.
a. i. A Baa-rated bond with coupon rate 6% and time to maturity 20 years.
ii. An Aaa-rated bond with coupon rate of 6% and time to maturity 20 years.
b. i. An A-rated bond with coupon rate 3% and maturity 20 years, callable at 105.
ii. An A-rated bond with coupon rate 6% and maturity 20 years, callable at 105.
c. i. A 4% coupon noncallable T-bond with maturity 20 years and YTM = 6%.
ii. A 7% coupon noncallable T-bond with maturity 20 years and YTM = 6%.



Jun 10, 2022
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