Question

Company X has 8% coupon bonds on the market with 20 years to maturity. If the...

Company X has 8% coupon bonds on the market with 20 years to maturity. If the bonds make semiannual payments and they are sold for 97.5% of par, what is the YTM? What is the current yield? What is the effective annual yield?

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Homework Answers

Answer #1

Solution:-

Assume Face Value of Bond is $1,000

Nper = 20 years * 2 = 40

PMT =

PMT = $40

PV = $1,000 * 0.975

PV = $975

To Calculate YTM-

Annual YTM = 4.13% * 2

Annual YTM = 8.26%

To Calculate Current Yield -

Current Yield =

Current Yield =

Current Yield = 4.10%

To Calculate Effective Annual Yield-

Effective Annual Yield =

Effective Annual Yield =

Effective Annual Yield = 8.43%

If you have any query related to question then feel free to ask me in a comment.Thanks.

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