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

Regresion analysis, If the regression line is drawn as Y = C + 1075x, when ...

If the regression line is drawn as Y = C + 1075x, when X was 2 and y was 239, given that the intercept was 11. Calculate the residual

Sketch the frequency resoponce, i) For a 3 term averagin filter, write a di...

i) For a 3 term averagin filter, write a difference eqatuon governing the filter and dervie the corresponding z transform Sketch a pole zero plot, would this filter be stable, why

Sampling, Advantages of sampling over population

Advantages of sampling over population

Average, characteristics of a Good Average

characteristics of a Good Average

AUTOMATED TELLER MACHINE (ATM) , AUTOMATED TELLER MACHINE (ATM) Computer m...

AUTOMATED TELLER MACHINE (ATM) Computer managed devices placed at a financial institution division or other place, which allow a client to execute primary checking actions (such a

Estimate the proportion of lake trout with lamprey scars, In a certain lake...

In a certain lake a limnologist wishes to estimate the proportion of lake trout with lamprey scars. (a) How large of a random sample should be taken if the limnologist has no pr

Depreciation, X purchased a machinery on instalment system for rs.27300 to ...

X purchased a machinery on instalment system for rs.27300 to be paid as follows. on delivery rs.8000, at the end of first year rs.7600, at the end of second years.6000, at the end

Define payroll withholdings, Define Payroll Withholdings The U. S. earn...

Define Payroll Withholdings The U. S. earnings tax system-as well as most condition earnings tax systems-requires business employers to hold paycheck taxation from their staff'

Confidence interval, Questions 1. A genetic experiment with peapods res...

Questions 1. A genetic experiment with peapods resulted in one sample of offspring that consisted of 443 green peapods and 170 yellow peapods.  Construct a 95% confidence inter

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