BUSINESS COLLEGE

30-year maturity bond with face value of $1,000 makes semiannual coupon payments and has a coupon rate of 8%. (Do not round intermediate calculations. Enter your answers as a percent rounded to 3 decimal places.) a. What is the yield to maturity if the bond is selling for $900?

Answers

Answer 1
Answer:

Answer:

The answer is 15.508%

Explanation:

The annual coupon rate is:

8% x 900 x 2 / $1,000 = 14.4%

The yield to maturity as follows:

Yield to maturity (YTM) = [Coupon payment + (Face Value - Present Value) / Time to Maturity] /  [(Face Value + Present Value) / 2]

=> YTM = [14.4% x $1,000 + ($1,000 - $900) / 30] / [ ($1,000 + $900) / 2] = 15.508%
Answer 2
Answer:

Final answer:

The yield to maturity (YTM) for a bond that has a face value of $1,000, semiannual coupon payments at an 8% rate, and a current market price of $900, can be calculated using the bond yield formula, considering certain variables like coupon payment, bond price, and periods until maturity. The YTM will be higher than the coupon rate as the bond is selling at a discount.

Explanation:

The yield to maturity (YTM) of a bond represents the internal rate of return earned by an investor who buys the bond today at the market price, provided that the bond is held until maturity. The yield to maturity can be calculated using the Bond Yield Formula:

P = [C * (1 - (1 + r)^-n) / r] + [F / (1 + r)^n]

Where: P = bond price; C = semiannual coupon payment; r = semiannual yield to maturity; n = number of periods (considering semiannual periods); F = face value of the bond.

Given a bond face value of $1,000, a semiannual coupon rate of 8% (or 4% per half year), a bond price of $900 and the number of periods of 60 (30 years * 2), you can calculate the yield to maturity by rearranging the formula and solving for 'r'.

Through this calculation process, you will find the yield to maturity is higher than the coupon rate, which is common when the bond is selling for less than its face value (a discount bond).

Learn more about Yield to Maturity here:

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Answers

Answer:

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Explanation:

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Answers

Answer:

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Explanation:

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Answers

Answer: Increase in demand

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Answers

Answer:

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Explanation:

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Answers

Answer: top-level managers still have to rely on the active support and cooperation of middle and lower-level managers in pushing needed changes in functional areas and operating units

Explanation:

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Answers

Answer:

b. $1.82m

Explanation:

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