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yield to maturity- you just purchased a bond which matures in 8 years. the bond has...

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
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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%
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