The required return can be observed in the market by finding the YTM on

The required return can be observed in the market by

This preview shows page 11 - 13 out of 25 pages.

20.Accrued interest is the coupon payment for the period times the fraction of the period that has passedsince the last coupon payment. Since we have a semiannual coupon bond, the coupon payment persix months is one-half of the annual coupon payment. There are five months until the next couponpayment, so one month has passed since the last coupon payment. The accrued interest for the bondis: 21.Accrued interest is the coupon payment for the period times the fraction of the period that has passedsince the last coupon payment. Since we have a semiannual coupon bond, the coupon payment persix months is one-half of the annual coupon payment. There are two months until the next couponpayment, so four months have passed since the last coupon payment. The accrued interest for thebond is: 22.The bond has 14 years to maturity, so the bond price equation is:P= $863.52 = $48.75(PVIFAR%,28) + $1,000(PVIFR%,28)Using a spreadsheet, financial calculator, or trial and error, we find:
C HAPTER 6 – 12 R = 5.881% This is the semiannual interest rate, so the YTM is: YTM = 2 5.881% YTM = 11.76% The current yield is the annual coupon payment divided by the bond price, so: Current yield = $97.50 / $863.52 Current yield = .1129, or 11.29% 23.

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture