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
Basic economic order quantity (EOQ) model  This model is one of the oldest and most commonly used in inventory control. It is based on a number of assumptions:  The dem

Suppose an entrepreneur owns a firm that has a production technology that generates the following revenue: R(e) = e 2 +100e where revenue depends on his effort level e. The monetar

Agency Theory An agency relationship arises whether one or more parties identified the principal contracts or hires another identified an agent to perform on his behalf some

In order to value a debt security correctly, we must understand the terms and conditions of debt securities precisely. These terms define the contractual rights of the debt securit

Suggestion regarding Credit limit. Should it be approved or not, what should be the amount of credit limit that electronics give to Booth Plastics.

A firm's current ratio is 1.5, and its quick ratio is 1.0. If its current liabilities are $10,000, what are its inventories?   a Current Ratio


Potential Investors - Measuring Business Performance Potential investors These parties are interested in a company in total both on long and short term basis in particula

Financial management is very important for any organization as at the end what does matter is the money. An effective financial management is of high importance for ensuring the be

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