Calculate the yield to maturity, Finance Basics

Assignment Help:

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).


Related Discussions:- Calculate the yield to maturity

Taxation position and profitability & liquidity, Taxation Position and Prof...

Taxation Position and Profitability & Liquidity Profitability and liquidity A company's capacity to pay dividend will be determined primarily with its capability to creat

Dow theory - stock exchange, Dow Theory - Stock Exchange This theory d...

Dow Theory - Stock Exchange This theory depends upon profiting of prices of a chart of secondary movement. The principal objective is to discover whilst there is a change in t

Central bank - banking institutions, Central Bank - Banking Institutions ...

Central Bank - Banking Institutions This is a bank which is entrusted along with the responsibility of keeping economic stability and financial soundness of a country.  Theref

A+/a1, A+/A1 It is one of the top ratings that a ratings agency allots ...

A+/A1 It is one of the top ratings that a ratings agency allots to an issuer or insurer. This rating indicates that the security or carrier has steady financial backing and ple

Foundation of Building Wealth, I am struggling with a PowerPoint Presentati...

I am struggling with a PowerPoint Presentation 8-10 slide the calculations and understanding Traditional IRAs and Roth IRAs, I guess that I need to prepare this for an audience. Sh

Define meaning of investment, Define Meaning of Investment Meanin...

Define Meaning of Investment Meaning of Investment: Investment involves making of a sacrifice in the present with hope of deriving future advantages. Investment has many

Computation of payback period method, Computation of Payback Period Method ...

Computation of Payback Period Method 1. Under uniform annual incremental cash inflows - if the venture or an asset generates uniform cash inflows then the payback period (PB

Determine the rate of return, 1. A stock pays no dividend and is expected t...

1. A stock pays no dividend and is expected to be sold for $50 after 4 years. If the investor's RRR is 12%, at what price is he/she willing to buy it? 2. ABC company has its ROE

Basic Business Math, A new pet shop wants to apportion their investment mon...

A new pet shop wants to apportion their investment money $132,000 for advertising, building upgrades, and education in the ratio of 5:4:3. How much money does each category get app

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