Determine ytm price formula, Basic Statistics

YTM can be determined using the price formula of a bond.

Part a

The present value (price) formula for a zero coupon bond is:

PV = F/(1+i)n

Plugging in the given information,

$300 = $1000/(1+i)15

(1+i)15 = 3.33

1+i = 1.08357

i = YTM = 0.08357 = 8.36%

Thus the YTM of the fifteen-yr zero coupon bond is 8.36%.

Part b

Semiannual coupon = 6%*$500/2 = $15

Plugging in the given information,

Price = $15/(1+(i/2)) + $15/(1+(i/2))2 +..... + $15/(1+(i/2)6 + $500/(1+(i/2)6 = $400

On trial and error using Excel, YTM has been determined to be 7.23%.

Thus the YTM of the three-yr semiannually 6% coupon bond is 14.45%.

Posted Date: 3/5/2013 8:01:52 AM | Location : United States







Related Discussions:- Determine ytm price formula, Assignment Help, Ask Question on Determine ytm price formula, Get Answer, Expert's Help, Determine ytm price formula Discussions

Write discussion on Determine ytm price formula
Your posts are moderated
Related Questions
Bedovin company manufactures office tables and chairs using job order costing. The data given below were taken from the records as of April 30, the first month of operations. Job

charlie removes the 12 face cards from a standard deck of cards then shuffles the face cards together on their own. He selects 2 cards from the pile. The probability that the first

Background: There was no 2004-05 National Hockey Leagues (NHL) season because of a labour dispute between the players and the teams. One of the outcomes of the labour dispute was

Consider a population of consumers uniformly distributed along the interval from left-hand (x = 0) to right-hand (x=1). The mass of consumers is 1. There are two firms (F1 and F2)


The data in the table below are the results of a random sample of recent home sales in your neighborhood that your boss has asked you to use to estimate the relationship between th

Alarm units are to be connected at four fixed positions along a pipeline. In how many ways can the four available alarm unites be connected to the four positions along the line?

What is a basis point? A base factor is a hundredth (1/100) of an amount factor. Indicated another way, one amount factor is equal to 100 base factors. This means that if an amo

There are 49 mice in a pet shop. 30 mice are white. 27 mice are male. 18 mice have short tails. 8 mice are white and have short tails. 11 mice are male and have short tails.

A survey was conducted among the residents of Pune City, its suburbs and the PuneCantonment area. The following three pie diagrams show their respective preferences for living in C