Answer:
The question is incomplete; the complete question is as follows;
<em>A 20-year maturity bond with par value $1,000 makes semiannual coupon payments at a coupon rate of 9%.
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a.
Find the bond equivalent and effective annual yield to maturity of the bond if the bond price is $940.(Round your intermediate calculations to 4 decimal places. Round your answers to 2 decimal places.)
Bond equivalent yield to maturity %
Effective annual yield to maturity %
b.
Find the bond equivalent and effective annual yield to maturity of the bond if the bond price is $1,000.(Do not round intermediate calculations.Round your answers to 2 decimal places.)
Bond equivalent yield to maturity %
Effective annual yield to maturity %
c.
Find the bond equivalent and effective annual yield to maturity of the bond if the bond price is $1,060.(Round your intermediate calculations to 4 decimal places. Round your answers to 2 decimal places.)
Bond equivalent yield to maturity %
Effective annual yield to maturity %
Explanation:
<em>PMT= 1000* 9% / 2= 45 </em>
(A). Type N= 40, FV= 1000, PV= -940, PMT= 45 into a financial calculator. Click the I / Yr key= 4.84% Maturity equivalent to bond yield= 4.84%* 2= 9.68%.
<em>Effective annual maturity yield= (1.0484)2-1 = 9.91 per cent</em>
(B). Type N= 40, FV= 1000, PV= -1000, PMT= 45 also into a financial calculator. Click the I / Yr key= 4.50 percent Maturity Bond equivalent yield= 4.50 percent* 2= 9 percent equal to the yearly coupon rate.
<em>Average annual maturity yield= (1.045)2-1= 9.20 per cent </em>
(C). Type N= 40, FV= 1000, PV= -1060, PMT= 45 into a financial calculator.
Click the I / Yr key = 4.19% Bond comparable yields to maturity = 4.19% * 2 = 8.38%
<em>Total yearly yield to maturity = (1.0419)2-1 = 8.55%</em>
