Calculate the yield to maturity, Finance Basics

Suppose the current yield curve is as follows:

1867_Calculate the yield to maturity.png

(a) Calculate the current market prices of two bonds with the following annual cash flows:

Bond A: A coupon of $60 is due immediately, and payable every 6 months until the bond matures in 2 years. The bond has a face value of $1, 000 payable in 2 years.

Bond B: A coupon of $20 is due immediately, and payable every 6 months until the bond matures in 2 years. The bond has a face value of $1, 000 payable in 2 years.

(b) Calculate the durations of the two bonds.

(c) Calculate the yield to maturity for each bond.

(d) Comment on the relationship between your answers to (b) and (c).

Posted Date: 2/22/2013 4:53:17 AM | Location : United States







Related Discussions:- Calculate the yield to maturity, Assignment Help, Ask Question on Calculate the yield to maturity, Get Answer, Expert's Help, Calculate the yield to maturity Discussions

Write discussion on Calculate the yield to maturity
Your posts are moderated
Related Questions
What are the characteristics of an efficient market? The word market efficiency refers to the speed, ease, and cost of trading securities. In a well-organized market, securitie

We have 10.000 genes and 4.000 of them are annotated for a certain attribute of interest. a. If we have a single set of 10 genes, how many of them should be annotated to be cons

How often does the "on the run" tsy change?

The Audiology Department at Randall Clinic offers many services to the clinic''s patients. The three most common , along with cost and utilization data, are as follows: Service Var

The average of the industry current ratio was 1.86 for 2004, 0.86 for 2005, and 0.87 for 2006. Lenovo had higher current ratio than the industry average in 2004. At that time, thei


Different Risk-profile - Shareholders and Management Shareholders will generally prefer high-risk-high return investments while they are diversified that is they have many inv

The Mountain Fresh Company had earnings per share (EPS) of $6.32 in 2006 and $11.48 in 2011. The company pays out 30 percent of its earnings as dividends per share (DPS), and the

Prepare Journal and Adjusting Entries I need assignment help on topic Prepare Journal and Adjusting Entries. Can you please suggest me the answer. The following two events o

What is the market price of a share of stock for a firm that pays dividends of $1.20 per share, has a P/E of 14, and a dividend payout ratio of 0.4?  market price of a share