**Question:**What is the yield to maturity (YTM) on a simple loan for $1,000 that requires a repayment of $2,000 in five years’ time?**Response:**The yield to maturity is ___%. (Round your response to one decimal place.)**Explanation:**This question asks for the yield to maturity (YTM) on a simple loan. Yield to maturity is a financial concept used to determine the annual return on a bond or loan if it is held until it matures. In this case, the initial loan amount is $1,000, and the repayment amount is $2,000 after five years. The YTM is calculated as the interest rate that equates the present value of the repayment to the original loan amount. This would typically require solving for the rate $ r $ in the formula: \[ 1000 = \frac{2000}{(1 + r)^5} \]Solving for $ r $ gives the YTM.

Here we calculate the yield to Maturity by using the future amount repaid so the calculation of the following by using the given information which are as follow-Here we calculate the Yield to Maturity by using the given data as follow- Given- The future amount to be repaid is 2000. Time is five years Loan amount is 1000 The interest rate or yield to maturity (YTM) is computed using future value rule FV = PV (1 + YTM)N 2000 = 1000 x (1 + YTM)5 2(1/5) = 1 + YTM YTM = 14.87% so here we conclude that here , yield to maturity is 14.9%

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What is the yield to maturity (YTM) on a simple loan for $1,000 that requires a repayment of $2,000 in five years' time? The yield to maturity is . (Round your response to one decimal place.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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