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Consider two $15,000 face value corporate bonds. Bond A is currently selling for $14,970 and matures in 16 years. Bond B sells for $14,025 and
Consider two $15,000 face value corporate bonds. Bond A is | ||||||
currently selling for $14,970 and matures in 16 years. | ||||||
Bond B sells for $14,025 and matures in 4 years. Calculate | ||||||
the current yield for both bonds if both have a coupon rate | ||||||
equal to 6%. (Assume a yearly coupon payment). | ||||||
1)Current yield Bond A to 2 decimal places % | ||||||
2)Current yield Bond B to 2 decimal places % | ||||||
3)YTM Bond A to 2 decimal places % | ||||||
4)YTM Bond B to 2 decimal places % | ||||||
5)Which current yield is a better approximation of the yield to | ||||||
maturity, A or B? |
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