Current yield and yield to maturity
[DOC File]Sample midterm
current yield=coupon/price= 100/900=11.11%. yield to maturity=from calculator=1 1.75%. capital gain yield= yield to maturity-current yield=0.64%. 15. If an investor purchases a bond when its current yield is higher than the coupon rate, then the bond's price will be expected to: A) increase over time, reaching par value at maturity.
[DOC File]Soln Ch 13 Bond prices
If the yield to maturity is greater than the current yield, then the bond offers the prospect of price appreciation as it approaches its maturity date. Therefore, the bond must be selling below par value. 16. The coupon rate is less than 9%. If coupon divided by price equals 9%, and price is less than par, then price divided by par is less than 9%.
[DOC File]Bond Yields and Prices
Current Yield to maturity (discount factor) Need to weight present value of cash flows from bond by time received. In order for a bond to be protected from the changes in interest rates after purchase, the price risk and coupon reinvestment must offset each other.
[DOC File]Chapter 4: Net Present Value
The bond maturing in 2003 has a yield to maturity greater than 6 3/8 percent. The closing price of the bond with the shortest time to maturity on the day before the quotation is $1,003.25. The annual coupon payment for the bond maturing in 2016 is $75.00. The current yield on the Wilson’s bond with the longest time to maturity is 7.29 percent.
[DOC File]Answers to Text Discussion Questions
It is higher than yield to maturity because it does not take into consideration the fact that the bond price will decline from $1,090.90 to $1,000 over the next 20 years. This factor lowers the yield to maturity. Current yield and yield to maturity comparison. 10. A 15-year, 7 percent coupon rate bond is selling for $839.27. a. What is the ...
[DOC File]Solutions to Chapter 4
The higher yield to maturity on the bond is commensurate with the higher yields available in the rest of the bond market. d. Current yield = coupon payment/bond price. As coupon payment remains the same and the bond price decreases, the current yield increases. 2. When the bond is selling at a discount, $970 in this case, the yield to maturity ...
[DOC File]Tuesday February 27, 2007
Finally, find the current yield as follows: Current yield = Annual interest/Current price = $120/$1,060 = 11.32%. 3. The Pennington Corporation issued a new series of bonds on January 1, 1982. The bonds were sold at par ($1,000), had a 14 percent coupon, and matured in 30 years, on December 31, 2011.
[DOCX File]Measuring Yield
The YTM is the discount rate that equates the cash flows to the price. It is the “promised yield”from holding the bond . IF. the bond is held to maturity and the coupons are reinvested at the YTM. What is the yield to maturity calculated on a bond-equivalent basis? Bond equivalent basis or Bond Equivalent Yield (BEY) is the common way to ...
[DOC File]CHAPTER 7
Current yield and yield to maturity Answer: e Diff: M. Statement e is the correct choice. If a bond sells for less than par, then its yield to maturity will exceed its coupon rate. If a bond sells at par, then its current yield, yield to maturity, and coupon rate are all the same.
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