Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Example: 10% coupon bond, with semiannual coupons, face value of 1,000, 20 years to maturity, $1,197.93 price Current yield = 100 / 1,197.93 = .0835

Example: 10% coupon bond, with semiannual coupons, face value of 1,000, 20 years to maturity, $1,197.93 price

Current yield = 100 / 1,197.93 = .0835 = 8.35%

Price in one year, assuming no change in YTM = 1,193.68

Capital gain yield = (1,193.68 1,197.93) / 1,197.93 = -.0035 = -.35%

YTM = 8.35 - .35 = 8%, which is the same YTM computed earlier

How did they find the price in one year assuming no change in YTM? My slide doesn't show me how and I need to know how to find it in order to understand the capital gain and YTM. Also, Please show using the functions for a BA 2 financial calculator if possible. Thank you!

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Management And Policy

Authors: James C. Van Horne

11th Edition

0137512236, 9780137512232

More Books

Students also viewed these Finance questions

Question

=+b) Compute the SD for each decision.

Answered: 1 week ago