Question
1. (25 points) A bond with face value of $1,000 is currently traded at $1,050. It matures in 10 years. Its coupon rate is 20%,
1. (25 points) A bond with face value of $1,000 is currently traded at $1,050. It matures in 10 years. Its coupon rate is 20%, paid quarterly
(a) (5 points) What is its current yield?
(b) (5 points) What is its YTM?
(c) (5 points) What is EAR?
(d) (10 points) Suppose that you decided to sell this bond 2 years later (after eight coupon pay ments). After selling it, you have realized a capital gain of 10%. What is YTM of the bond at the moment of selling?
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Small Business Management Launching and Growing New Ventures
Authors: Justin Longenecker, Leo Donlevy, Terri Champion, William Petty, Leslie Palich, Frank Hoy
6th Canadian edition
176532218, 978-0176532215
