*This preview shows
pages
1–4. Sign up
to
view the full content.*

This
** preview**
has intentionally

**sections.**

*blurred***to view the full version.**

*Sign up*This
** preview**
has intentionally

**sections.**

*blurred***to view the full version.**

*Sign up*
**Unformatted text preview: **Current yeild, YTM, effective annual yeild? Solution $1,040.00 = 0.084 * 1,000/2 [(1 - 1/(1 + y/2)^18)/y/2] + 1 T T R R C R C R C PV ) 1 ( 000 , 1 ) 1 ( ... ) 1 ( 1 2 + + + + + + + + = $- $200.00 $400.00 $600.00 $800.00 $1,000.00 $1,200.00 $1,400.00 Tim Bond Price T T R C PV 000 , 1 ) 1 ( 1 1 + +-= PV = $1,040 for YTM = 3.887% (semiannua Current yeild = 84/1040 = 8.08% Effective annual yeild = (1 + Periodic interest payment)^k -Problem 12 8% coupon bonds, price $1,095, semiannual payments, mature in 20 years Coupon rate to sell at par ? $1,095 = 0.08 * 1,000/2 [(1 - 1/(1 + y/2)^40)/y/2] + 1,000/(1+y/2)^40 PV = $1,095 for YTM = 7.103% To sell at par the coupon rate should be the same as the yeild to maturity that is 7.103% T R R ) 1 ( + 1,000/(1+y/2)^18 Bonds Miryang: Yeisu: ime to Maturity al) and 7.774% annual- 1 = (1.03887)^2 - 1 = 7.925%...

View
Full
Document