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Inessa05 [86]
3 years ago
10

During recessionary periods, bonds that were issued many years ago have a higher coupon rate than currently issued bonds. Theref

ore, they may sell at a premium, a price higher than their face value, because of currently low coupon rates. A $50,000 bond that was issued 15 years ago is for sale for $60,000. What rate of return per year will a purchaser make if the bond coupon rate is 19% per year payable semi-annually, and the bond is due 5 years from now?
Business
1 answer:
Mandarinka [93]3 years ago
6 0

Answer:

YTM = 6.818%

Explanation:

YTM = \frac{C + \frac{F-P}{n }}{\frac{F+P}{2}}

C= cash payment of the bond: 50,000 x 19%/2 = 4,750

F= Face Value= 50000

P= purchase value=60000

n= number of payment= 5 years at 2 payment a year = 10

YTM = \frac{4750 + \frac{50,000-60,000}{10 }}{\frac{50,000+60,000}{2}}

Important: it is better to calculate the YTM using a financial calculator, this is an approximation

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3 years ago
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The correct answer is the option A: Testimonial Advertising.

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3 years ago
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Answer:

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Answer:

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