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vitfil [10]
3 years ago
11

Kempton Enterprises has bonds outstanding with a $1,000 face value and 10 years left until maturity. They have an 10% annual cou

pon payment, and their current price is $1,175. The bonds may be called in 5 years at 109% of face value (Call price = $1,090). What is the yield to maturity? Round your answer to two decimal places.

Business
1 answer:
viva [34]3 years ago
4 0

Answer:

YTM is 7.46%

Explanation:

Given:

Face value of bond (FV) = $1,000

Years to maturity (nper) = 10

Coupon rate = 10%

Coupon payment (pmt) = $100 (0.1×1,000)

Price of bond (PV) = $1,175

If the bonds are held till maturity, then yield to maturity is calculated using excel function =Rate(nper,pmt,PV,FV)

Yield of bond if held till maturity is 7.46%

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Explanation:

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In the maturity phase, the sales of the product slow down and in some cases stop because of market saturation. Competitors are well established offering attractive prices to consumers. All marketing efforts are directed to wipe out competition pressures by lowering their demand.

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