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I don't know how to calculate Yield to maturity. Can Anybody explain how to calculate it? EXAMPLE 6.1 (Using the term structure to price a
I don't know how to calculate Yield to maturity. Can Anybody explain how to calculate it?
EXAMPLE 6.1 (Using the term structure to price a bond) Suppose that the current term structure has the following yields on zero coupon bonds. Term 12 Year 1 Year 12 Year 2-Year Zero Coupon Bond Rate 8% 9% 10% 11% Find the price per $100 face amount and yield to maturity of each of the following 2-year bonds (with semi-annual coupons): (i) zero coupon bond, (ii) 5% annual coupon rate, (iii) 10% annual coupon rate. SOLUTION (1) Price is 100(1+-) * = 80.72 and yield to maturity is (nominal) 11%. (ii) Price is 2.5[(1.04)-'+(1.045)2+(1.05)-3] +102.5(1.055)4 = 89.59. Yield to maturity is (nominal) 10.9354%. (iii) Price is 5[01.04)-1+(1.045) 2 +(1.05)-?]+105(1.055)-4 Yield to maturity is (nominal) 10.8775%. = 98.46Step by Step Solution
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