A 2-year bond with par value $1,000 making annual coupon payments of $116 is pri

Q: A 2-year bond with par value $1,000 making annual coupon payments of $116 is pri

a. yield to maturity = 11.60% since bond is at par b. at rate = 7% N = 1 PMT = 116 FV = 1000 use PV function in Excel price after a year = 1042.9907 realized YTM = (1042.9907 + 116)/1000 - 1 = 15.90% simlarly for 10% realized return = 13.05% for 13% realized return = 10.36%

ID: 2780255 • Letter: A

Question

A 2-year bond with par value $1,000 making annual coupon payments of $116 is priced at $1,000.

What is the yield to maturity of the bond? (Round your answer to 1 decimal place. Omit the "%" sign in your response.)

What will be the realized compound yield to maturity if the 1-year interest rate next year turns out to be (a) 7%, (b) 10%, (c) 13%? (Round your answers to 2 decimal places. Omit the "%" sign in your response.)

What is the yield to maturity of the bond? (Round your answer to 1 decimal place. Omit the "%" sign in your response.)

Explanation / Answer

a. yield to maturity = 11.60% since bond is at par

at rate = 7%

N = 1

PMT = 116

FV = 1000

use PV function in Excel

price after a year = 1042.9907

realized YTM = (1042.9907 + 116)/1000 - 1 = 15.90%

simlarly for 10%

realized return = 13.05%

for 13%

realized return = 10.36%

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A 2-year bond with par value $1,000 making annual coupon payments of $116 is pri

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