Question

PLEASE SHOW YORK WORK!! STEP BY STEP! Posting just the answers or excel spreadsheet doesnt help me

Question 2 A firm issues a bond today with a $1,000 face value, an 8% coupon interest rate, and a 25-year maturity. An investor purchases the bond for $1,000. (2.1) What is the yield to maturity (YTM)? Explain. (2.2) Suppose the investor bought the bond described previously for $900. What is the YTM? (2.3) Suppose the bond described previously has a price of $1,100 five years after it is issued. What is the YTM at that time?sta normal so o brobivi

Answer 1

2.1 Par value or FV =1000
PMT =8%*1000 =80
Number of Periods =25
Price or PV =1000
Since price is issued at par YTM and coupon rate are same , Hence YTM =8%

2.2 FV =1000
PMT =80
N=25
PV =-900
Using Financial Calculator
N=25;PMT=80;PV=-900;FV=1000;CPT I/Y =7.05%

2.3 FV =1000
PMT =80
N=25-5 =20
PV =-1100
Using Financial Calculator
N=25;PMT=80;PV=-1100;FV=1000;CPT I/Y =9.02%
YTM =9.02%