Question

Suppose that a 1-year zero-coupon bond with face value $100 currently sells at $88.99, while a 2-year zero sells at $76.99. You are considering the purchase of a 2-year-maturity bond making annual coupon payments. The face value of the bond is $100, and the coupon rate is 16% per year. a. What is the yield to maturity of the 2-year zero?(Do not round intermediate calculations. Round your answers to 3 decimal places.) Yield to Maturity 2-year zero 10 b. What is the yield to maturity of the 2-year coupon bond? (Do not round intermediate calculations. Round your answers to 3 decimal places.) Yield to Maturity 2-year coupon bondſ

Answer 1

1.
=(100/76.99)^(1/2)-1=13.9679772179313%

2.
=RATE(2,16%*100,-(100*16%/(1+(100/88.99)^1-1)+(100+100*16%)/(1+(100/76.99)^(1/2)-1)^2),100)=13.8502164909199%

3.
=(1+(100/76.99)^(1/2)-1)^2/(1+(100/88.99)^1-1)-1=15.5864397973763%

4.
=(100+100*16%)/(1+(1+(100/76.99)^(1/2)-1)^2/(1+(100/88.99)^1-1)-1)=100.357793010451

5.
=(100.357793010451+100*16%)/(100*16%/(1+(100/88.99)^1-1)+(100+100*16%)/(1+(100/76.99)^(1/2)-1)^2)-1=12.372176649062%