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Bonds of Zello Corporation with a par value of $1,000 sell for $960, mature in five years, and have a 7% annual coupon rate paid

  • Bonds of Zello Corporation with a par value of $1,000 sell for $960, mature in five years, and have a 7% annual coupon rate paid semiannually. a. Calculate the: i. Current yield. ii. Yield to maturity to the nearest whole percent (i.e., 3%, 4%, 5%, etc.). iii. Realized compound yield for an investor with a 3-year holding period and a reinvestment rate of 6% over the period. At the end of three years the 7% coupon bonds with two years remaining will sell to yield 7%. b. Cite one major shortcoming for each of the following fixed-income yield measures: i. Current yield. ii. Yield to maturity. iii. Realized compound yield

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