Yield to maturity current yield
[DOC File]Bond Yields and Prices
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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]Quantitative Problems Chapter 10
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What is the current yield? Solution: The current price of the bond is computed as follows: PMT 50; N 10; FV 1000; I 6. Compute PV; PV 926.40. The current yield 50/926.40 5.4%. 11. A $1,000 par bond with an annual coupon has only 1 year until maturity. Its current yield is 6.713% and its yield to maturity …
[DOC File]ch8man.wpd - Sharif
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8.3 Coupon Bonds, Current Yield, and Yield to Maturity. 8.4 Reading Bond Listings. 8.5 Why Yields for the Same Maturity Differ. 8.6 The Behavior of Bond Prices over Time. Summary. A change in market interest rates causes a change in the opposite direction in the market values of all existing contracts promising fixed payments in the future.
[DOC File]CHAPTER 7
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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.
[DOC File]Sample midterm
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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.
[DOCX File]Measuring Yield
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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]Answers to Text Discussion Questions
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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]Soln Ch 13 Bond prices
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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%.
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