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1) Yield to maturity is the term for how much interest is earned on a bond...

1) Yield to maturity is the term for how much interest is earned on a bond at the end of its term. For example, a one year discount bond with a face value of $1000 that is purchased for $800 has a yield to maturity of 0.25 or 25%. That is, it is the interest rate that equate the future value with the present value. What is the yield to maturity on a one year discount bond with a face value of $1000 that is priced at $944? Enter your answer in decimal form (eg., if you calculate 4.2% enter 0.042) __________

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Answer #1

YTM = (F-P)/P

= (1000-944)/944

0.05932 or 5.932%

Therefore Yield to Maturity in this case is 0.059

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