Harrimon Industries bonds have 6 years left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 9%. What is the yield to maturity at a current market price of $786? Round your answer to two decimal places. % $1,151? Round your answer to two decimal places. %
Harrimon Industries bonds have 6 years left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 9%. What is the yield to maturity at a current market price of $786? Round your answer to two decimal places. % $1,151? Round your answer to two decimal places. %
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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Question
Harrimon Industries bonds have 6 years left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 9%.
- What is the yield to maturity at a current market price of
- $786? Round your answer to two decimal places.
%
- $1,151? Round your answer to two decimal places.
%
- $786? Round your answer to two decimal places.
Expert Solution
Step 1: Step 1 Introduction:
Yield to maturity
Yield to maturity (YTM) is used to calculate the weighted average cost of capital for the company and is utilized as the cost of debt. The YTM displays the percentage annual return an investor may anticipate from a bond if they hold it till maturity. It is, therefore, the internal rate of return (IRR) of a bond investment assuming the investor retains the bond to maturity, with all scheduled payments made and reinvested at the same pace.
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