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Problem 7-19 (similar to) Question Help (Expected rate of return and current yield) Time Warner has bonds that are selling fo
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Answer #1

Bond Price, (PV) = $654

Bond Par Value, (FV) = $1,000

Coupon Rate, (PMT) = 0.094(1,000) = $94

Time to Maturity, (N) = 19 years

Calculating Yield to Maturity,

Using TVM Calculation,

I = [PV = -654, FV = 1,000, N = 19, PMT = 94]

I = 0.1498

So,

Yield to Maturity = 14.98%

Current Yield = Annual Payment/Bond Price

Current Yield = 94/654

Current Yield = 14.37%

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