(30) Settlement Date: 11/14/2016 and Maturity Date: 11/14/2026
Tenure = 11/14/2026 - 11/14/2016 = 10 years or 20 half-years
Rate = 10 % (coupon), Coupon Payment Frequency = 2, Redemption Price (Face vAlue) = $ 100 and Current Price = 98 (% of Face Value) = 0.98 x 100 = $ 98
Let the yield to maturity be 2r
Semi-Annual Coupon = 0.5 x 0.1 x 100 = $ 5
Therefore, 98 = 5 x (1/r) x [1-{1/(1+r)^(20)}] + 100 / (1+r)^(20)
Using EXCEL's Goal Seek Function/ a financial calculator/ hit and trial method to solve the above equation, we get:
r = 0.51627 or 5.1627 %
Yield to Maturity = 5.1627 x 2 = 10.3254% ~ 10.33 %
As is observable, the yield to maturity is not more than 12%. Hence, the given statement is false.
QUESTION 29 A venture capitalist may work backwards to value an early stage venture. She starts with the obj...
QUESTION 49 Dilution of ownership is a benefit to an early stage venture capitalist because it indicates that other investors want a share of the same venture. O True O False QUESTION 50 USE the FINRA website to answer questions about the corporate bond with the following CUSIP number 88160RACS. The yield to maturity on this bond is higher than the coupon. O True ○ False QUESTION 51 Holders of equity interests in UBER prior to the IPO faced restrictions...
QUESTION 31 A bank that funds a portfolio of assets with higher credit risk than another bank has to have more equity capital if creditors are to be indifferent between lending to either bank. True False QUESTION 32 Subprime assets lost value rapidly between 2007 and 2009. This lowered the value of banks that had exposure to these assets and financial institutions that had exposure to banks that were exposed to subprime risk. Since the assets were hard to value...