Using the trial-and-error method, this bond's yield to maturity is 9.66 percent.
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</h3><h3>What do bonds do?</h3>
An IOU-like debt security called a bond. Bonds are issued by borrowers to attract capital from investors ready to extend a loan to them for a specific period of time. When you purchase a bond, you are making a loan to the issuer, which could be a corporate, government, or municipality. Bonds are fixed-income securities that reflect loans from investors to borrowers (typically corporate or governmental).
As stated in the assertion
We have stated that Uan zhang purchased a 10-year bond with a 6.5% interest rate.
We also need to determine this bond's yield to maturity.
In order to achieve this,
There is a donation of $911 10.
n = 10 years until maturity
Rate of interest = C = 8.25%
Semi-annual coupon: $1,000 divided by 0.0825/two equals $41.25.
I = yield to maturity
Bond present value = PB = $911.10
To find YTM, use the trial-and-error method. We can infer that the yield to maturity is greater than the coupon rate because the bond is being sold at a discount.
YTM = 9.4%
= $522.90 + 391.54 ≅ $914.43
About 9.66 percent of the YTM is present.
- Calculating the exact YTM using a financial calculator yielded a result of 9.656 percent (2 4.828%).
- So, using the trial-and-error method, this bond's yield to maturity is 9.66 percent.
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