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. Suppose a firm issued a 9% coupon bond (semiannual coupon) 20 years ago. The bond n ow has 10 years left until its maturity

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Answer #1

Expected yield

Using financial calculator

Inputs:- N = 20

PV = -750

Pmt = 45

FV = 700

I/y (Ytm) = compute

We get, ytm = 5.8151%, semi annual , 11.6303% annual

Stated yield

Using financial calculator

Inputs: N = 20

PV = -750

FV = 1,000

Pmt = 45

I/y (ytm) = compute

We get, ytm = 6.8285%, semiannual ; 13.6569% annual

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