An investor is considering a 9.25%, 15 (years) at $953. What is YTM?

Business & Finance
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An investor is considering a bond that currently sells at a discount ($953) to the face value of $1,000. The coupon rate is 9.25% paid semiannually. If there are 15 years left on the bond what is the yield to maturity?

Mar 29th, 2015

b) here n= 15*2 =30 payments, price =$953, coupon payment = 9.25%/2*1000 =$46.25

so 953 = 46.25/(1+r)+46.25/(1+r)^2+----+46.25/(1+r)^15 +1000/(1+r)^15

=> solving for r, we get r=4.93%

but annual r =4.93%*2 =9.86%

so YTM =9.86%


Mar 29th, 2015

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Mar 29th, 2015
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Mar 29th, 2015
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