Question
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
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started