What is the YTM of the bond given the information below. The bond makes annual interest payments. (Do not round intermediate calculations, round answer to two decimals, i.e. 32.16) Coupon Rate:8.4% Maturity (years):6 Current Price: $1,159.63 Par value: $1,000.00
What is the YTM of the bond given the information below. The bond makes annual interest payments. (Do not round intermediate calculations, round answer to two decimals, i.e. 32.16) Coupon Rate:8.4% Maturity (years):6 Current Price: $1,159.63 Par value: $1,000.00
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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What is the YTM of the bond given the information below. The bond makes annual interest payments. (Do not round intermediate calculations, round answer to two decimals, i.e. 32.16)
Coupon Rate:8.4%
Maturity (years):6
Current Price: $1,159.63
Par value: $1,000.00
Expert Solution
Step 1 Formula
YTM measures the actual return you will get if you hold bond till maturity. It consider the price at which you invested. Because, you won't receive principal amount of your investment, which is $1059.63. You will reccive only coupon and face value at maturity.
YTM can be calculated by using this formula
YTM =
[C+ (Face value- price)/ Period to maturity]/(face value+price)/2
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