Question

**Q14.** Find the yield to maturity of the
following securities:

- A security paying $1,000 in one year, for which you pay $926 today.
- A security paying $80 one year from now and $1,080 two years from now, for which you pay $1,050 today.
- A security paying $50 every six months for the next five years (beginning six months from now), plus the return of the face value of $1,000 at the end of the five years, for which you pay $1,000 today.

**Please include solutions, not the ones already posted
(Not correct). Thank you.**

- A security paying $50 every six months for the next five years (beginning six months from now), plus the return of the face value of $1,000 at the end of the five years, for which you pay $1,000 today.

Answer #1

a

Future value = present value*(1+ rate)^time |

1000 = 926*(1+Interest rate/100)^1 |

Interest rate % = 7.99 |

b

K = N |

Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k] + Par value/(1 + YTM)^N |

k=1 |

K =2 |

1050 =∑ [(8*1000/100)/(1 + YTM/100)^k] + 1000/(1 + YTM/100)^2 |

k=1 |

YTM% = 5.3 |

c

K = Nx2 |

Bond Price =∑ [(Semi Annual Coupon)/(1 + YTM/2)^k] + Par value/(1 + YTM/2)^Nx2 |

k=1 |

K =5x2 |

1000 =∑ [(10*1000/200)/(1 + YTM/200)^k] + 1000/(1 + YTM/200)^5x2 |

k=1 |

YTM% = 10 |

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