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The yield of the bond if held to maturity is in what range.
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Answer to Problem 81P
Therefore the correct option is
Explanation of Solution
Given:
Face value is
Bond interest rate is
Maturity time is
Bond is bold at
Calculation:
Calculate the interest rate in 6 months.
Calculate the amount received after 6 months.
Write the expression to calculate the present worth of the bond.
Here, current price of the bond is
Substitute,
Apply trial and error method and determine the interest rate.
Interest rate | Value | ||
Interpolate the interest rate between
Substitute,
Write the expression to calculate the nominal annual rate of interest.
Substitute,
Conclusion:
Therefore, the correct option is
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Chapter D Solutions
ENGR.ECONOMIC ANALYSIS
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