Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

My question is: Do I go with 15 years or 10 years when trying to find the yield to maturity for this bond? That bond

My question is: Do I go with 15 years or 10 years when trying to find the yield to maturity for this bond?

That bond was issued 15 years ago and now has ten years left to maturity. The bond must have been issued when interest rates were higher than they are today because it has a coupon rate of 8.00% and is trading at 109.365% of face value. The amount outstanding is not relevant. Bond valuation arithmetic gives one the luxury of pretending that the amount issued was $100, that the coupons are four dollars every six months, the face value is $100 and its market price is $109.365. This simplifies calculation but one must be mindful that actual amounts are working in millions of dollars not hundreds of dollars so the $0.005 is very important.

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

Commodity Futures Trading With Stops

Authors: Joseph R. Maxwell Sr.

1st Edition

0917832132, 978-0917832130

More Books

Students also viewed these Finance questions