Example: Calculate the Yield to Maturity (YTM) Suppose you paid $1,070 for a 20-year bond with a face value of $1,000 and a coupon rate of 7.5%. In this case, the bond was purchased at a discount This bond pays $75 in interest per year. which means that the YTM should be higher than the stated coupon rate. Using the provided yield to maturity (YTM) formula, the YTM for this bond is your final answer to two decimal places.) %. (Note: Do not round intermediate calculations. Round & Continue
Example: Calculate the Yield to Maturity (YTM) Suppose you paid $1,070 for a 20-year bond with a face value of $1,000 and a coupon rate of 7.5%. In this case, the bond was purchased at a discount This bond pays $75 in interest per year. which means that the YTM should be higher than the stated coupon rate. Using the provided yield to maturity (YTM) formula, the YTM for this bond is your final answer to two decimal places.) %. (Note: Do not round intermediate calculations. Round & Continue
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Please help me understand how to answer the last equation?
Transcribed Image Text:Ch 14: Assignment - Investing in Stocks and Bonds
purchased at a discount or at a premium:
Yield to Maturity (YTM)
1
I+ {{FV-CV) / N)
(FV+CV)/ 2
This bond pays $ 75
In this case, the bond was purchased at a discount
where:
in interest per year.
I
FV
CV
N
Example: Calculate the Yield to Maturity (YTM)
Suppose you paid $1,070 for a 20-year bond with a face value of $1,000 and a coupon rate of 7.5%.
hip
-
Interest paid annually in dollars
Using the provided yield to maturity (YTM) formula, the YTM for this bond is
your final answer to two decimal places.)
Face value
Current value
Number of years until maturity
which means that the YTM should be higher
0 x
than the stated coupon rate.
Grade It Now
%. (Note: Do not round intermediate calculations. Round
A-Z
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K
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