Use a calculator or Excel to find the yield on each investment below as measured

Question

Use a calculator or Excel to find the yield on each investment below as measured by its internal rate of return. Express as a percent rounded to two decimal places; that is, _._ _%. There are examples in the text, and there is a video in the Unit Content. a. A U.S. savings bond costs $660 now, and will pay its face value of $1000 at maturity in 10 years. The single payment at maturity is the only cash flow provided by the bond. b. A corporate bond costs $950 now (Year 0). It will make interest payments of $70 each in years 1, 2, and 3. In year 4, the bond will pay $70 in interest and pay its face value $1000.

Explanation / Answer

a. 660 = 1000/(1+r)^10 internal rate of return,r= 4.39% b. 950 = 70/(1+r) + 70/(1+r)^2 + 70/(1+r)^3 + 1070/(1+r)^4 internal rate of return,r= 8.53%

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