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Question

Harrimon Industries bonds have 5 years left to maturity. Interest is paid annually, and the bonds have a $1,000

par value and a coupon rate of 8%.

  1. What is the yield to maturity at a current market price of

A. $778? Round your answer to two decimal places.

  1.     %

B. $1,058? Round your answer to two decimal places.

b.    %





2.Would you pay $778 for each bond if you thought that a "fair" market interest rate for such bonds was 14%—that is, if rd = 14%?


Top Answer

#1 We need Excel or calculator to calculate YTM. Look at the Excel in Explanation for formula. In principal, we want to... View the full answer

20191014 6 YTM.png

A
B
Price
778
1058
Par Value
1000
1000
Coupon
8%
8%
Coupon Frequency
1
1
Settlement Date
14/10/2019
14/10/2019
Maturity Date
14/10/2024
14/10/2024
Yield
6.1%
-0.3%
>...

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