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JamesBond Corporation issued 10-year bonds two years ago. The coupon rate on these bonds is 7.5...

  1. JamesBond Corporation issued 10-year bonds two years ago. The coupon rate on these bonds is 7.5 percent. The bonds make semiannual coupon payments. Today you can buy each of these bonds for 105 percent of par value. Calculate the YTM. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
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Answer #1

Current Price = 1000* 105% = 1050

Coupon 0.075 / 2 = 0.0375

Maturity = 8 years * 2 = 16

SInce the Current Price of Bond > Par Value, the TYM will be less than Coupon.

Let's assume the YTM be 6% = 0.06 /2 = 0.03

Value of Bond =

=

= 1094.20826521

Now,

Let's assume the YTM be 6% = 0.06 /2 = 0.03

Value of Bond =

=

= 1030.23529202

YTM =

= 6% + ((1094.20826521 - 1050) / (1094.20826521 - 1050) + (1050 - 1030.23529202)) * (7-6)

= 6% + (44.20826521 / (44.20826521) + (19.76470798)) * 1

= 6% + 0.68

= 6.68%

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