20UIUC%20FIN%20300%20Bond%20CY%20k%20Gain%20Practice%20Problems%20Answers%20v2-2%20FA09

20UIUC%20FIN%20300%20Bond%20CY%20k%20Gain%20Practice%20Problems%20Answers%20v2-2%20FA09

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: UNIVERSITY OF ILLINOIS College of Business - Department of Finance - Finance 300 (Financial Markets) Professor James Jackson Coupon Bonds: Current Yield, Capital Gain and Yield To Maturity Question: Does Current Yield (CY) + Average Capital Gain (Avg. k Gain) = Yield To Maturity (YTM)? Answer: No. Current Yield (CY) + Annual Capital Gain = Yield To Maturity (YTM). Example #1 Coupon Face Coupon YTM Semi-Annual $1,000.00 $60.00 4.00% Approximate YTM TTM Price Face - Price Total k Gain % CY % Avg. k Gain CY + Avg. k Gain Annual k Gain % CY + Annual k Gain 10.0 $1,163.51-$163.51-0.1405 0.0516-0.0141 0.0375-0.0117 0.0399 9.0 $1,149.92-$149.92-0.1304 0.0522-0.0145 0.0377-0.0123 0.0399 8.0 $1,135.78-$135.78-0.1195 0.0528-0.0149 0.0379-0.0130 0.0399 7.0 $1,121.06-$121.06-0.1080 0.0535-0.0154 0.0381-0.0137 0.0399 6.0 $1,105.75-$105.75-0.0956 0.0543-0.0159 0.0383-0.0144 0.0399 5.0 $1,089.83-$89.83-0.0824 0.0551-0.0165 0.0386-0.0152 0.0398 4.0 $1,073.25-$73.25-0.0683 0.0559-0.0171 0.0388-0.0161 0.0398 3.0 $1,056.01-$56.01-0.0530 0.0568-0.0177 0.0391-0.0170 0.0398 2.0 $1,038.08-$38.08-0.0367 0.0578-0.0183 0.0395-0.0180 0.0398 1.0 $1,019.42-$19.42-0.0190 0.0589-0.0190 0.0398-0.0190 0.0398 0.5 $1,009.80-$9.80-0.00971 0.059417-0.009708738 0.04971 UNIVERSITY OF ILLINOIS...
View Full Document

Page1 / 4

20UIUC%20FIN%20300%20Bond%20CY%20k%20Gain%20Practice%20Problems%20Answers%20v2-2%20FA09

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online