Determine ytm price formula, Basic Statistics

Assignment Help:

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%.


Related Discussions:- Determine ytm price formula

Three major accounts and their rules, Three major Accounts and their Rules ...

Three major Accounts and their Rules There are three major Records which are a) Personal Accounts b) Real Accounts c) Moderate Accounts Rule for Personal Account: Ch

Luxor case, Susan’s proposed budget for 2011 includes a substantial repayme...

Susan’s proposed budget for 2011 includes a substantial repayment of the bank loan. If the repayment occurs, is the firm likely to break even in 2012? Explain.

Internatinal business, VK Ltd a multi-product Company, furnishes you the fo...

VK Ltd a multi-product Company, furnishes you the following data relating to the year 2000 First Half of the year Second Half of the year Sales Rs. 45,000 Rs. 50,000 Total Co

Assignment., Introduce the aim of this section of the report including an e...

Introduce the aim of this section of the report including an explanation of the data to be analysed. • Use Excel to produce a box and whisker plot for the two sets of booking data

Ascertainment bias, Ascertainment Bias A possible form of the bias, ma...

Ascertainment Bias A possible form of the bias, mainly in retrospective studies, which arises from a relationship amongst the exposure to the risk factor and the probability o

Draw the roc diagram-equilibrium probability, A. Use the inequality derived...

A. Use the inequality derived for part C question 3; to obtain an inequality required x *CD  = 1 to remain stable against DD invaders. Also draw the ROC diagram discussed in class

Test of hypothesis, A toothpaste company wants to know if its new products ...

A toothpaste company wants to know if its new products increases the length of time in between dentists visits for its uses. The company sets a target of 180 days to determine if i

Least squares analysis, Least squares method of fitting a line ( the line o...

Least squares method of fitting a line ( the line of best fit or the regression line) through the scatter diagram is a method which minimizes the sum of squared vertical deviations

Determine the probability - baye theorem, In a suburban community, 30% of t...

In a suburban community, 30% of the households use Brand A toothpaste, 27% use Brand B, 25% use Brand C, and 18% use Brand D. In the four groups of households, the proportions of r

Why Agency code is useful, Why Agency code is useful The four personality n...

Why Agency code is useful The four personality number code allocated by the Workplace of Economical Control to select the unique business models of condition. Organization requirem

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd