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Fiesta28 [93]
3 years ago
8

Clock and Cane Company. has 6.8 percent, semiannual coupon bonds on the market with twelve years left to maturity, face value of

$1000. If the bond currently sells for $989.45, what is its YTM
Business
1 answer:
svet-max [94.6K]3 years ago
6 0

Answer:

YTM is 6.90%

Explanation:

The yield to maturity on the bond can be computed using the rate formula in excel.

=rate(nper,pmt,-pv,fv)

nper is the time to maturity of 20 years multiplied by 2 since the bond is paying interest on semi-annual basis

pmt is the semi-annual interest receivable by investor which 6.8%/2*$1000=$34

pv is the current market price of $989.45

fv is the face value of $1000

=rate(40,34,-989.45,1000)

rate=3.45%

The 3,45% is the semi-annual YTM, whereas the annual YTM 3.45% *2=6.90%

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4 years ago
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What is real rate of return?
The annual percentage of financial gain on an investment that has been prorated for inflation is known as the real rate of return. As a result, the real rate of return provides an accurate representation of the real purchasing power of the a given sum of money over time. The investor can calculate how much more of a nominal return seems to be real return by adjusting this same nominal return to account for inflation. Investors must account for the effects of additional factors, including such taxes and investing fees, in addition to adjusting for inflation, in order to calculate real returns on their investments or to make investment decisions. Subtracting this same nominal interest rate from the inflation rate yields the real rate of return.


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