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Pie
3 years ago
15

A firm's bonds have a maturity of 10 years with a $1,000 face value, a 9 percent semiannual coupon, are callable in 5 years at $

1,050, and currently sell at a price of $1,080. What is their yield to maturity
Business
1 answer:
Sladkaya [172]3 years ago
4 0

Answer:

Yield to maturity is 3.94%

Explanation:

Yield to maturity is the annual rate of return that an investor receives if a bond bond is held until the maturity.

Face value = F = $1,000

Coupon payment = $1,000 x 9% = $90/2  = $45 semiannually

Selling price = P = $1080

Number of payment = n = 10 years x 2 = 20

Yield to maturity = [ C + ( F - P ) / n ] / [ (F + P ) / 2 ]

Yield to maturity = [ $45 + ( 1000 - 1080 ) / 20 ] / [ (1,000 + 1080 ) / 2 ]

Yield to maturity = [ $45 - 4 ] / 1040 = $41 /1040 = 0.394 = 3.94%

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2 years ago
To save for retirement, Jamie decides to invest in an annuity that pays 5% annual interest, compounded annually. If Jamie contri
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Answer:

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Interest= future value - total investment

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Interest= $26,131.91

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