Question

please help to calculate discount yield, YTM, Holding period yield and Capital Gain. I have done the rest. This question is intended for personal knowledge and not for assignment purposes.

of QUESTIUN 3: upum URT eyr Assume that a 10-year bond with a face value of Tshs 100,000 is selling at a discount price of Tshs 95,000. It has an annual coupon income of Tshs 10,000. The investor plar to sell it after 5 years at a price of Tshs 97,000 (at end of year 5). REQUIRED: Compute the following measures of bond yield: (i) Nominal Yield, (ii) Discount yield, (iii) YTM, (iv) Current yield, (v) Holding period yield, (vi) Capital gain yield. V. [25 marks)

Answer 1

A B C D E F G H I J K L M N 100000 (i) face Value Term Present value Coupon Coupon rate (Nominal rate) Coupon/Face value =10000/100000 10.00% 95000 10000 (ii) Discount yield =[(FV - PV)/FV]*(1/term) Discount yield =[(100000-95000)/100000]*(1/10) Discount yield = 0.50% (iii) YTM 10.84% =RATE(C3,C5,C4 -1,C2,0) =RATE(10,10000,95000*-1,100000,0) =RATE(Term, Coupon,PV*-1,FV,0) 17 (iv) Current yield = Coupon / present yield Current yield = 10000/95000 Current yield 10.53% Holding period return = (Final Price-Initial Price)/Initial Price Holding period return (97000-95000)/95000 Holding period return 2.11% Capital gains yield = Increase in bond price per year/ Original price - (95301.27-95000)/95000 Capital gains yield = 0.32% face Value 100000 Term Yield 10.84% Coupon 10000 Present value ($95,301.27)