(Yield-To-Maturity) for $990. You have just bought a 5% coupon $1,000 face-value bond with 3 years until maturity (a) Construct the timeline that represents the discounted cash flow. Write down the equation that would calculate the yield-to-maturity. (c) Use Excel to solve for the yield-to-maturity. What is the formula you would write to solve for the yield-to-maturity? Report your answer. (d) You have held this bond for one year and earned the first coupon interest. Unfortunately, you have to sell this bond for $1,000 to Firm A at the end of this one-year period. Calculate the actual return. What is the yield-to-maturity for Firm A who bought the bond from you in (d)? Explain your answer. (Hint: The answer is an exact percentage, virtually no calculation needed.) (e) (f) Firm A then immediately sells this bond to Firm B for $1,100. What is the yield-to-maturity for Firm B? Explain your answer. (Hint: The answer is an exact percentage, virtually no calculation needed.)
(Yield-To-Maturity) for $990. You have just bought a 5% coupon $1,000 face-value bond with 3 years until maturity (a) Construct the timeline that represents the discounted cash flow. Write down the equation that would calculate the yield-to-maturity. (c) Use Excel to solve for the yield-to-maturity. What is the formula you would write to solve for the yield-to-maturity? Report your answer. (d) You have held this bond for one year and earned the first coupon interest. Unfortunately, you have to sell this bond for $1,000 to Firm A at the end of this one-year period. Calculate the actual return. What is the yield-to-maturity for Firm A who bought the bond from you in (d)? Explain your answer. (Hint: The answer is an exact percentage, virtually no calculation needed.) (e) (f) Firm A then immediately sells this bond to Firm B for $1,100. What is the yield-to-maturity for Firm B? Explain your answer. (Hint: The answer is an exact percentage, virtually no calculation needed.)
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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Hi, just need help with part e and f, thank you!
Transcribed Image Text:8. (Yield-To-Maturity)
for $990.
You have just bought a 5% coupon $1,000 face-value bond with 3 years until maturity
(a)
Construct the timeline that represents the discounted cash flow.
(b)
Write down the equation that would calculate the yield-to-maturity.
(c)
Use Excel to solve for the yield-to-maturity. What is the formula you would write to solve for
the yield-to-maturity? Report your answer.
(d)
You have held this bond for one year and earned the first coupon interest. Unfortunately, you
have to sell this bond for $1,000 to Firm A at the end of this one-year period. Calculate the actual return.
What is the yield-to-maturity for Firm A who bought the bond from you in (d)? Explain your
answer. (Hint: The answer is an exact percentage, virtually no calculation needed.)
(e)
(f)
Firm A then immediately sells this bond to Firm B for $1,100. What is the yield-to-maturity for
Firm B? Explain your answer. (Hint: The answer is an exact percentage, virtually no calculation needed.)
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