You own a bond that pays $73 in interest annually. The face value is $1,000 and the current market price is $1,065.44. The bond matures in 14 years. What is the yield to maturity?
You own a bond that pays $73 in interest annually. The face value is $1,000 and the current market price is $1,065.44. The bond matures in 14 years. What is the yield to maturity?
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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You own a bond that pays $73 in interest annually. The face value is $1,000 and the current market price is $1,065.44. The bond matures in 14 years. What is the yield to maturity?
Expert Solution
Step 1
The Given set of data is
Interest payment (C) annually is $73
The face value (F) is $1000
The current market price (P) is $1065.44
Bond maturity (n) in 14 years.
Formulae for Yield to maturity is
YTM is
Where C is Coupon/ Interest payment
F is the Face value
P is Price
n is years to maturity.
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