a). To find the YTM, we need to put the following values in the financial calculator:
N = 20*2 = 40;
PV = -950;
PMT = [8%/2]*1000 = 40;
FV = 1000;
Press CPT, then I/Y, which gives us 4.26
So, Periodic Rate = 4.26%
BEY = Periodic Rate * No. of compounding periods in a year
= 4.26% * 2 = 8.52%
EAR = [1 + Periodic Rate]No. of compounding periods in a year - 1
= [1 + 0.0426]2 - 1 = 1.0871 - 1 = 0.0871, or 8.71%
b). To find the YTM, we need to put the following values in the financial calculator:
N = 20*2 = 40;
PV = -1000;
PMT = [8%/2]*1000 = 40;
FV = 1000;
Press CPT, then I/Y, which gives us 4
So, Periodic Rate = 4%
BEY = Periodic Rate * No. of compounding periods in a year
= 4% * 2 = 8%
EAR = [1 + Periodic Rate]No. of compounding periods in a year - 1
= [1 + 0.04]2 - 1 = 1.0816 - 1 = 0.0816, or 8.16%
c). To find the YTM, we need to put the following values in the financial calculator:
N = 20*2 = 40;
PV = -1050;
PMT = [8%/2]*1000 = 40;
FV = 1000;
Press CPT, then I/Y, which gives us 3.76
So, Periodic Rate = 3.76%
BEY = Periodic Rate * No. of compounding periods in a year
= 3.76% * 2 = 7.51%
EAR = [1 + Periodic Rate]No. of compounding periods in a year - 1
= [1 + 0.0376]2 - 1 = 1.0765 - 1 = 0.0765, or 7.65%
Bond Price: $950.00
8.52% Bond Equivalent Annual Yield To Maturity
8.71% Effective Annual Yield to Maturity
Bond Price: $1,00.00
8.00% Bond Equivalent Annual Yield To Maturity
8.16% Effective Annual Yield to Maturity
Bond Price: $1,050.00
7.51: Bond Equivalent Annual Yield to Maturity
7.65% Effective Annual Yield to Maturity
A 20-year maturity bond with par value $1,000 makes semiannual coupon payments at a coupon rate...
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