Question
Arjen owns investment A and 1 bond B. The total value of his holdings is 1,522 dollars. Investment A is expected to pay annual cash
Arjen owns investment A and 1 bond B. The total value of his holdings is 1,522 dollars. Investment A is expected to pay annual cash flows to Arjen of 126.35 dollars per year with the first annual cash flow expected later today and the last annual cash flow expected in 3 years from today. Investment A has an expected return of 12.55 percent. Bond B pays semi-annual coupons, matures in 17 years, has a face value of $1000, has a coupon rate of 9.48 percent, and pays its next coupon in 6 months. What is the yield-to-maturity for bond B? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.
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