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posledela
3 years ago
8

Parkway Void Co. Issued 17-year bonds two years ago at a coupon rate of 9.1 percent. The bonds make semiannual payments. If thes

e bonds currently sell for 115 percent of par value, what is the YTM?
Business
1 answer:
Lerok [7]3 years ago
4 0

Answer:

7.53%

Explanation:

the yield to maturity = {coupon + [(face value - market value)/n]} / [(face value + market value)/2]

  • coupon = $1,000 x 9.1% x 1/2 (semiannual) = $45.50
  • face value = $1,000
  • market value = $1,000 x 115% = $1,150
  • n = (7 years - 2 years) x 2 semiannual periods = 30

YTM = {$45.50 + [($1,000 - $1,150)/30]} / [($1,000 + $1,150)/2] = $40.50 / $1,075 = 3.7674% x 2 = 7.5349% ≈ 7.53%

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