Question

yield to maturity- you just purchased a bond which matures in 8
years. the bond has a face value if $1,000 and a 6.25% annual
coupon rate. the bond has a current yueld of 7.29%. what is the
YTM

Answer #1

we know that current yield = annual coupon / Current bond price | |||||

therefore we have | |||||

Annual coupon = 1000*6.25% = | 62.5 | ||||

7.29% | =62.5/Current bond price | ||||

Bond price = | =62.5/7.29% | ||||

Bond price = | $ 857.34 | ||||

we have to use financial calculator to solve this problem | |||||

Put in calculator | |||||

FV | 1000 | ||||

PMT | 1000*6.25% | 62.5 | |||

N | 8 | ||||

PV | $(857.34) | ||||

compute I = | 8.81% | ||||

therefore YTM = |
8.81% |
||||

Yield to Maturity and Current Yield
You just purchased a bond that matures in 5 years. The bond has
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An
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A
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calculate using a financial calculator

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An 8% semiannual coupon bond matures in 6 years. The bond has a
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Round your answer to the nearest cent.
$
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NO NEED FOR EXPLANATION
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Question 1 of 71
The yield to maturity on a coupon bond is …
· always greater than the
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· the rate an investor
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reinvest all coupons at the current yield.
· the rate an investor earns
if she holds the bond to the maturity date, assuming she can
reinvest all coupons at the yield to maturity.
· only equal to the internal
rate of return of a bond...

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