A 10,000 Par Disney bond has a 4% coupon and will mature in 10 years. If its yielding (YTM) 5% when you buy it, and in 2.38 years you sell it when its yielding 4% what will be your sale proceeds (how much $$ will you get when you sell it? I'm not looking for your profit?
A 10,000 Par Disney bond has a 4% coupon and will mature in 10 years.
If its yielding (YTM) 5% when you buy it, and in 2.38 years you sell it when its yielding 4% what will be your sale proceeds (how much $$ will you get when you sell it? I'm not looking for your profit?
Yield to Maturity:
The yield to maturity (YTM) is the expected annual rate of return for a bond assuming that the investor holds the bond until its maturity date. YTM is calculated using the following formula:
YTM= (FV/PV)1/n -1
YTM= yield to maturity
FV= bond’s maturity value or par value
PV=the bond’s value/price today
n=number of years to maturity
Present Value of a coupon bond:
C= coupon payment
i= interest rate/ YTM
n= Time to maturity
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