A bond will pay $80 in interest at the end of each of the next three...
A bond will pay $80 in interest at the end of each of the next three years, plus $1,000 at the end of the third year. If it has a present market price of $950, its yield-to-maturity is: (a) 8.5%. (b) 9.4%. (c) 10%. (d) 10.5%. (e) 11.2%.
PLEASE PROVIDE HANDWRITTEN WORK
Homework Answers
Let yield to maturity be x%
At this rate;present value of interest and future value=950
950=80/1.0x+80/1.0x^2+80/1.0x^3+1000/1.0x^3
Hence x=yield to maturity=10%(Approx).
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