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never [62]
3 years ago
5

Keyser Materials has 8 percent coupon bonds on the market with 19 years to maturity. The bonds make semiannual payments and curr

ently sell for 102 percent of par. what is the current yield on keyser materials bonds? YTM? the effective annual yield?A) 7.84%, 7.92%,7.95%B) 7.84%,7.92%,7.97%C) 7.80%,7.84%,7.92%D) 7.80%,7.92%,7.95%E) 7.84%,7.80%,7.95%
Business
1 answer:
Ilia_Sergeevich [38]3 years ago
3 0

Answer:

E) 7.84%,7.80%,7.95%

Explanation:

Let Bond Face value = FV

                                   = 1000

Semiannual bond So nper = 19*2

                                            = 38

Coupon = 8%.  

SO PMT = 8%*1000/2

              = 40

Current rice = PV

                    = 102%*1000

                    = 1020

1. Current Yield = Coupon/Current prce

                          = (2*40)/1020

                          = 7.84%

2. YTM = 2*Rate(nper,pmt,pv,fv)

(Rate is multuplied by 2 as it is semi bond.)

            = 2*Rate(39,40,-1020,1000)

            = 7.80%

3. Effectve annual yield = (1+i/n)^n-1

where n is no of payment in a year

                                       = (1 + 8%/2)^2 - 1

                                       = 7.95%

Therefore, The current yield is 7.84%, The YTM is 7.80% and the effective annual yield is 7.95%

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As an Organizational Psychologist, you have thought of arranging a picnic in two weeks' time for your employees from all departments and their families to unwind their work stress and give them a healthy mental break. There are many fun activities that you have planned. For the children, there will be games like three-legged races and kite-flying. For the adults, besides the baseball game in the afternoon, there will also be sack race and horseshoes. There will be prizes for the winners of all the events. Lunch should be around noon, and you are generously providing all the food and drinks, so let your employees know that they do not need to bring anything.

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MEMORANDUM No. 0120

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