Homework Answers
Face Value = $100
Current Price = $98.35
Days to Maturity = 120 days
Answer a.
Yield to Maturity = [(Face Value - Current Price) / Current
Price] * [365 / Days to Maturity]
Yield to Maturity = [($100 - $98.35) / $98.35] * [365 / 120]
Yield to Maturity = 0.016777 * 3.041667
Yield to Maturity = 0.0510 or 5.10%
Answer b.
Effective Annual Yield = [1 + (Face Value - Current Price) /
Current Price]^(365 / Days to Maturity) - 1
Effective Annual Yield = [1 + ($100 - $98.35) / $98.35]^(365 / 120)
- 1
Effective Annual Yield = 1.016777^3.041667 - 1
Effective Annual Yield = 1.0519 - 1
Effective Annual Yield = 0.0519 or 5.19%
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