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show all steps please CHAPTER 4 Price of a bond = present value of all coupon payments and par value all discounted at the YTM
show all steps please
CHAPTER 4 Price of a bond = present value of all coupon payments and par value all discounted at the YTM YTM = yield to maturity of the bond **When semi-annual coupon payments, remember to change the N, I/Y, and PMT** Current Yield =currentpriceannualcouponpayment Capital Gains Yield =PtPt+1Pt YTM ( Yield to Maturity )= Current Yield + Capital Gains Yield rd=r+IP+DRP+LP+MRPrd=rRF+DRP+LP+MRP (rd = cost of debt, r= real risk-free rate, IP= inflation premium, rRF= nominal risk-free rate, LP= liquidity premium, DRP = default risk premium, MRP= maturity risk premium) Use the relationship between the total return (YTM) and the current yield and the capital gains yield. What is the capital gains yield? Current yield =9.34%, capital gains yield =1.09% Current yield =9.34%, capital gains yield =2.09% Current yield =6.16%, capital gains yield =1.09% Current yield =6.16%, capital gains yield =2.09%Step by Step Solution
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