A 5.66% annual coupon, 19-year bond has a yield to maturity of 4.14%. Assuming the par value is $1,000 and the YTM is expected not to change over the next year, what is the expected Current Yield for this bond? Please share your answer as a %.
A 5.66% annual coupon, 19-year bond has a yield to maturity of 4.14%. Assuming the par value is $1,000 and the YTM is expected not to change over the next year, what is the expected Current Yield for this bond? Please share your answer as a %.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:A 5.66% annual coupon, 19-year bond has a yield to maturity of 4.14%. Assuming the par value is
$1,000 and the YTM is expected not to change over the next year, what is the expected Current Yield
for this bond? Please share your answer as a %.
![1)
2)
3)
4)
5)
If you want to use formulas, listed below are some formulas commonly used in TVM Calculations:
Remembering that an annuity is a series of cash flows in which you make a lump sum payment or series of payments and in return obtain regular
disbursements beginning either immediately (annuity due) or at some point in the future.
PV of ordinary annuity (assumptions: 1) The periodic payment does not change, 2) The rate does not change, 3) The first payment is one period away):
--[-(+]
PV
Amaity
Where: P = periodic payment, r = periodic rate, and n = no of periods.
PV of annuity due (assumptions: 1) The periodic payment does not change, 2) The rate does not change, 3) The first payment is TODAY)::
+[-(+7)]
PV
- PV
Annuity De
FV of ordinary annuity (assumptions: 1) The periodic payment does not change, 2) The rate does not change, 3) The first payment is one period away):
=
- [+)-1]
Annuity 1+r)=P+P
FV
FV of annuity due (assumptions: 1) The periodic payment does not change. 2) The rate does not change, 3) The first payment is TODAY)::
(+7)²-1]
Annuity Dur
PV
FV
= FV
Amai (1+r) = (
Note that if in addition to annuity like cash flows, if there is a payment at the end of the period in addition to the annuity (periodic) payment,
then we need to adjust the PV calculations accordingly. So for example, if there is a payment FV occurring at the end of the n periods.
the PV of an ordinary annuity is adjusted by the PV of the final lump sum payment.
-[-].a.
d
FV
(1+r)"
1) For problems with NO periodic payments, simply put the Periodic Payment 0
2) To solve for periodic payment, simply reverse the appropriate formula (depending on if the problem involves PV or FV)
3) To solve for the rate, simply reverse the appropriate formula (depending on if the problem involves PV or FV)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5287ae0a-203d-4d39-bed1-52e338ea42d6%2Ff8ff559d-4865-41b0-a4d1-54d5b79259db%2Fi7yoq6p_processed.jpeg&w=3840&q=75)
Transcribed Image Text:1)
2)
3)
4)
5)
If you want to use formulas, listed below are some formulas commonly used in TVM Calculations:
Remembering that an annuity is a series of cash flows in which you make a lump sum payment or series of payments and in return obtain regular
disbursements beginning either immediately (annuity due) or at some point in the future.
PV of ordinary annuity (assumptions: 1) The periodic payment does not change, 2) The rate does not change, 3) The first payment is one period away):
--[-(+]
PV
Amaity
Where: P = periodic payment, r = periodic rate, and n = no of periods.
PV of annuity due (assumptions: 1) The periodic payment does not change, 2) The rate does not change, 3) The first payment is TODAY)::
+[-(+7)]
PV
- PV
Annuity De
FV of ordinary annuity (assumptions: 1) The periodic payment does not change, 2) The rate does not change, 3) The first payment is one period away):
=
- [+)-1]
Annuity 1+r)=P+P
FV
FV of annuity due (assumptions: 1) The periodic payment does not change. 2) The rate does not change, 3) The first payment is TODAY)::
(+7)²-1]
Annuity Dur
PV
FV
= FV
Amai (1+r) = (
Note that if in addition to annuity like cash flows, if there is a payment at the end of the period in addition to the annuity (periodic) payment,
then we need to adjust the PV calculations accordingly. So for example, if there is a payment FV occurring at the end of the n periods.
the PV of an ordinary annuity is adjusted by the PV of the final lump sum payment.
-[-].a.
d
FV
(1+r)"
1) For problems with NO periodic payments, simply put the Periodic Payment 0
2) To solve for periodic payment, simply reverse the appropriate formula (depending on if the problem involves PV or FV)
3) To solve for the rate, simply reverse the appropriate formula (depending on if the problem involves PV or FV)
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