Assume there is a 12- year, 9.5% semiannual coupon bond, with a par value of $1000. The bond sellsy for $1,152. A. What is the bond's yield to maturity. B. What is the bond's current yield?
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Semiannual payments= 9.5%*1000/2= 47.5
bond's yield to maturity= r
1152 = 47.5/(1+r/2) + 47.5/(1+r/2)^2 + 47.5/(1+r/2)^3 +47.5/(1+r/2)^24
bond's yield to maturity = 7.55%
bond's current yield = 9.5%*1000/1152= 8.25%
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