A two-year bond with par value $1,000 making annual coupon payments of $97 is priced at $1,000. Required: a. What is the yield to maturity of the bond? (Round your answer to 1 decimal place.) Yield to maturity b. What will be the realized compound yield to maturity if the one-year interest rate next year turns out to be (a) 7.7%, (b) 9.7%, (c) 11.7 % ? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Interest Rate Realized YTM 7.7% 0.7% 11.7% % %

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
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A two-year bond with par value $1,000 making annual coupon payments of $97 is priced at $1,000.
Required:
a. What is the yield to maturity of the bond? (Round your answer to 1 decimal place.)
Yield to maturity
%
b. What will be the realized compound yield to maturity if the one-year interest rate next year turns out to be (a) 7.7%, (b) 9.7%, (c) 11,7%?
(Do not round intermediate calculations. Round your answers to 2 decimal places.)
Interest Rate Realized YTM
7.7%
%
9.7%
%
11.7%)
%
Transcribed Image Text:A two-year bond with par value $1,000 making annual coupon payments of $97 is priced at $1,000. Required: a. What is the yield to maturity of the bond? (Round your answer to 1 decimal place.) Yield to maturity % b. What will be the realized compound yield to maturity if the one-year interest rate next year turns out to be (a) 7.7%, (b) 9.7%, (c) 11,7%? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Interest Rate Realized YTM 7.7% % 9.7% % 11.7%) %
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