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What is the yield to maturity on the following bonds; all have maturity of 10 years, a face value of $1000, and a coupon rate
What is the yield to maturity on the following bonds; all have maturity of 10 years, a face value of $1000, and a coupon rate of 2% (paid semiannually). The bonds' current market values are $900, $910, $920,..., $1100. Useful Excel function: RATE(nper, pmt, pv, [fv], [type], [guess]) that calculates the interest rate per period of an bond nper: The total number of payment periods in an annuity. pmt: The payment made each period and cannot change over the life of the annuity. pv: The present value. . fv (op): The future value, or a cash balance you want to attain after the last payment is made. If fv is omitted, it is assumed to be 0. type (op): The number 0 or 1 and indicates when payments are due. - 0 or omitted: At the end of the period - 1: At the beginning of the period Note that the present value is negative while the payment and future values are positive. The present value is negative because this is a payment for the investment, and the future value and payments are positive because these are payments you receive. Repeat the above problem using a coupon rate of 4, 6, 8, 10%. What do your calculations imply about the relation between the coupon rate and yield to maturity
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