Yield vs coupon rate
[DOC File]Quantitative Problems Chapter 5
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The bond’s yield to maturity is greater than its coupon rate. b. If the yield to maturity stays constant until the bond matures, the bond’s price will remain at $850. c. The bond’s current yield is equal to the bond’s coupon rate. d. Statements b and c are correct. e. All of the statements above are correct.
[DOC File]Bonds, Instructor's Manual
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Nov 13, 2008 · Corporate vs. Treasury bond yields 1. Suppose the real risk-free rate is 3.50%, the average future inflation rate is 2.25%, a maturity premium of 0.08% per year to maturity applies, i.e., MRP = 0.08%(t), where t is the years to maturity.
[DOCX File]Chapter 03 - Valuing Bonds
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This is the implied yield on a 6mo T-bill in 6months. If we are indifferent between the two investments, it’s because we expect the 6-mo rate. 6-mo from now to be 5.4%. It is the . Implied Forward Rate. The same principle can be used to get any implied forward rate The general formula is: …
[DOC File]Chapter 10
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In that case, it must have a YTM that is below the 9 percent coupon rate, because all premium bonds must have coupons which exceed the going interest rate. Going through the same procedures as before--plugging the appropriate values into a financial calculator and then pressing the r = I button, we find that at a price of $1,134.20, r = YTM = 7 ...
[DOC File]INFLATION, CASH FLOWS AND DISCOUNT RATES
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If current interest rates are below the coupon rate, a fixed-rate bond will sell at a "premium" above its par value. g. The current yield on a bond is the annual coupon payment divided by the current market price. YTM, or yield to maturity, is the rate of interest earned on a bond if it is held to maturity.
What is the difference between a bond's yield rate and its ...
At a rate of 5.75%, the T-bond is just below your required rate. 3. What is the yield on a $1,000,000 municipal bond with a coupon rate of 8%, paying interest annually, versus the yield of a $1,000,000 corporate bond with a coupon rate of 10% paying interest annually? Assume that you are in the 25% tax bracket. Solution:
[DOC File]Corporate vs - JustAnswer
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If the coupon rate is higher than the yield, then investors must be . expecting a decline in the capital value of the bond over its remaining life. Thus, the bond’s price must be greater than its face value. Conversely, if the yield is greater than the . coupon, the price will be below.
[DOCX File]Implied Forward Rates
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Promised Yield ” Later we will calculate total return from holding a bond ... both change together so the coupon rate and YTM stay equal. So floating rate bond usually stay at or near par. Complication: The spread for the coupon is in the bond contract – it can’t change! The spread in …
[DOC File]Bonds, Instructor's Manual
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y = current yield to maturity on the debt instrument in question = current forward rate on a loan that involves lending at time t with repayment at time t+j. The current t-period spot rate is the rate that prevails now on borrowing for t periods, with all interest and principal due at time t (like a zero-coupon bond).
[DOC File]CHAPTER 7
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The yield to maturity of the par bond equals its coupon rate, 8.75%. All else equal, the 4% coupon bond would be more attractive because its coupon rate is far below current market yields, and its price is far below the call price. Therefore, if yields fall, capital gains on the bond will not be limited by the call price.
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