Question 9
Last year, you bought a bond with face value $1000, maturity 15 years, coupon rate of 5.5% per year payable semi-annually and yield to maturity of 7% per year. Currently the bond sells for $900. How much would be your total yield if you sell this bond today?
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13.71% |
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10.78%. |
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(17.84%) |
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(15.79%) |
please don't copy answers from other posts... Double check the answer.. I need it now.. thank you
Coupon Rate =5.5%
coupon =5.5%*1000/2 = 27.50
Number of Periods = 15*2 = 30
Semi annual YTM =7%/2 =3.5%
Price of bond Last Year =PV of coupons + Pv of par Value
=27.50*(1-(1+3.5%)^30+1000/(1+3.5%)^30 =862.06
Price of Bond This Year = 900
Total Yield of Bond today =( Price Today - Price Last Year + 2*
Coupons)/Price Last Year =(900 -862.06 +2* 27.50)/862.06
=10.78%
(Option b is correct option)
Question 9 Last year, you bought a bond with face value $1000, maturity 15 years, coupon...