How to think about yield to maturity

    • [DOC File]Bonds, Instructor's Manual

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      The yield curve is the curve that results when yield to maturity is plotted on the Y-axis with term to maturity on the X-axis. o. When the yield curve slopes upward, it is said to be “normal,” because it is like this most of the time. Conversely, a downward-sloping yield curve is …

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    • [DOC File]Bonds, Instructor's Manual

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      YTM, or yield to maturity, is the rate of interest earned on a bond if it is held to maturity. Yield to call (YTC) is the rate of interest earned on a bond if it is called. If current interest rates are well below an outstanding callable bond's coupon rate, the YTC may be a more relevant estimate of expected return than the YTM, since the bond ...

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    • [DOC File]Winthrop University

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      Current yield = $80/$950 = 8.42%. 4. What is the yield to maturity? The interest rate the bond will yield over its remaining life. There are five components necessary to find the yield to maturity. Four of these components are given and the fifth one has to be solved for. Present value is the bond’s current price. This is what the bond sells ...

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    • [DOC File]Chapter 10

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      You will find that the yield to maturity on a semi-annual basis is 4.26%. This implies a bond equivalent yield to maturity of: 4.26% ( 2 = 8.52%. Effective annual yield to maturity = (1.0426)2 – 1 = 0.0870 = 8.70%. Since the bond is selling at par, the yield to maturity on a semi-annual basis is the same as the semi-annual coupon, 4%.

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    • [DOC File]Econ 175 - University of California, San Diego

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      30 year maturity, 8% coupon rate, paying semiannually, callable in 5 years at call price $1100. The bond currently sells at 7% YTM (3.5% per half year). And I think its safe to assume that the par value is $1000.

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    • [DOC File]Quiz 1: Fin 819-02

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      The yield to maturity of a bond can be thought of as the: A) Net present value (NPV) of the bond . B) Internal rate of return (IRR) of the bond . C) Modified internal rate of return (MIRR) of the bond . D) Payback period. E) None of the above . Answer: B. 18. Consider a bond with a face value of $1,000, a coupon rate of 0%, a yield to maturity ...

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    • [DOC File]Answers to Text Discussion Questions

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      Why is it slightly higher than the yield to maturity? 12-9. $100/$1,090.90 = 9.17%. 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.

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    • [DOC File]CHAPTER 7

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      b. If the yield to maturity for both bonds remains at 8 percent, Bond A’s price one year from now will be higher than it is today, but Bond B’s price one year from now will be lower than it is today. c. If the yield to maturity for both bonds immediately decreases to 6 percent, Bond A’s bond will have a larger percentage increase in value. d.

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