a) Which of the following bonds offers the highest yield to maturity? (Assume all 3 bonds...
a) Which of the following bonds offers the highest yield to maturity? (Assume all 3 bonds have a 365-day term.)
- A 0-coupon bond, quoted at 6.00% using a bond equivalent yield and semi-annual compounding convention
- A 0-coupon bond, quoted at 6.00% using a bond equivalent yield and annual compounding convention
- A 0-coupon bond, quoted at 6.00% MMY
- All offer an identical YTM
b) What is the quoted yield on a 2-year, 0-coupon US corporate bond priced at 90? (This bond uses the semi-annual compounding convention.)
- 10.819%
- 5.409%
- 5.338%
- 2.669%
- 2.205%
Homework Answers
a. Option D Because there will less change or negligable change between those provided bond options. thus they will have identical YTM
b.Semi Annual Compounding Convention
"RATE(NPER,PMT,PV,FV,TYPE)"
"RATE(4,0,-90,100,0)"
NPER= Number of Periods
PMT = Coupon = 0
PV= Current Price
FV = maturity value
TYPE = End of year payments
Thus Rate = (1 + 2.669%) ^ 2 - 1
Thus Rate = 5.409% Option C
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