Question
1. You purchase a bond with a face value (par) of $1000 and a coupon payment of $50. A. If the bond sold for $1000,
1. You purchase a bond with a face value (par) of $1000 and a coupon payment of $50.
A. If the bond sold for $1000, what must be the yield to maturity?
B. What if instead, the bond sold today for $960. What is the yield to maturity?
C. What if the bond sold for $1,060. What is the yield to maturity?
D. Suppose instead that it was a two-year bond and you went to sell it after one year. The price of the bond then increased to $1,060. What is your return on holding the bond?
E. Now, if the bond price fell to $960 when you went to sell it, what is your return?
PV=FV/(1+i)^t
YTM= [Annual Interest +(Par Value- Current Price/Years to Maturity)/(Par Value + Current Price/2)]
Return= Annual Interest+(P1-P0)/P0
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