CFIN
CFIN
5th Edition
ISBN: 9781305661639
Author: Scott Besley, Eugene Brigham
Publisher: Cengage Learning
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Chapter 5, Problem 20PROB
Summary Introduction

Yield:

Yield is the return to be earned from an investment, if hold it for a specific period.

Yield includes payment of interest or dividend but does not include capital appreciation.

Calculate the yield as follows:

Yield=(Nominal risk free rate+Liquidity premium+Maturity risk premium+Default risk premium)

Given one year Treasury bond rate is 2.4%, one year bond yield is equal to 4.8%, Liquidity premium is equal to 0.3 and maturity risk premium is 0.15.

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