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Dmitriy789 [7]
3 years ago
13

Leechtown Co. has 4.3% coupon bonds on the market with 18 years left to maturity. The bonds make annual payments. If the bond cu

rrently sells for $870, what is its YTM? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Yield to maturity %
Mathematics
1 answer:
oksian1 [2.3K]3 years ago
6 0

Answer:

YTM = 5.45%

Step-by-step explanation:

Here, we are interested in calculating the yield to maturity.

Mathematically;

Annual coupon=1000*4.3%=43

YTM=[Annual coupon+(Face value-Present value)/time to maturity]/(Face value+Present value)/2

=[43+(1000-870)/18]/(1000+870)2

=5.45%

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The term "closed" in math means that if you take two items from a set, do some operation, then you'll always get another value in the same set (sometimes you may get the same value as used before). For example, adding two whole numbers leads to another whole number. We therefore say "the set of whole numbers is closed under addition". This applies to integers as well because integers are positive and negative whole numbers. So we can say that integers are closed under addition.

Integers are not closed under division. Take two integers like 2 an 5 and divide: 2/5 = 0.4 which is not an integer. Integers don't have decimal parts.

The set of whole numbers is {0,1,2,3,...} and we can subtract the two values 1 and 2 to get 1-2 = -1. The order matters here. Subtracting a larger value from a smaller leads to a negative. The value -1 is not in the set of whole numbers. So we can say that whole numbers is not closed under subtraction

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3 years ago
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Alex_Xolod [135]
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Hope this helps~
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Step-by-step explanation:

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