Business, 22.02.2020 03:54 legazzz

A 20-year maturity bond with par value of $1,000 makes semiannual coupon payments at a coupon rate of 10%. Find the bond equivalent and effective annual yield to maturity of the bond for the following bond prices. (Round your answers to 2 decimal places.)

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Answer from: dondre54

The question is incomplete; the complete question is as follows;

A 20-year maturity bond with par value $1,000 makes semiannual coupon payments at a coupon rate of 9%.

Find the bond equivalent and effective annual yield to maturity of the bond if the bond price is $940.(Round your intermediate calculations to 4 decimal places. Round your answers to 2 decimal places.)

Bond equivalent yield to maturity %

Effective annual yield to maturity %

Find the bond equivalent and effective annual yield to maturity of the bond if the bond price is $1,000.(Do not round intermediate calculations.Round your answers to 2 decimal places.)

Bond equivalent yield to maturity %

Effective annual yield to maturity %

Find the bond equivalent and effective annual yield to maturity of the bond if the bond price is $1,060.(Round your intermediate calculations to 4 decimal places. Round your answers to 2 decimal places.)

Bond equivalent yield to maturity %

Effective annual yield to maturity %

Explanation:

PMT= 1000* 9% / 2= 45

(A). Type N= 40, FV= 1000, PV= -940, PMT= 45 into a financial calculator. Click the I / Yr key= 4.84% Maturity equivalent to bond yield= 4.84%* 2= 9.68%.

Effective annual maturity yield= (1.0484)2-1 = 9.91 per cent

(B). Type N= 40, FV= 1000, PV= -1000, PMT= 45 also into a financial calculator. Click the I / Yr key= 4.50 percent Maturity Bond equivalent yield= 4.50 percent* 2= 9 percent equal to the yearly coupon rate.

Average annual maturity yield= (1.045)2-1= 9.20 per cent

(C). Type N= 40, FV= 1000, PV= -1060, PMT= 45 into a financial calculator.

Click the I / Yr key = 4.19% Bond comparable yields to maturity = 4.19% * 2 = 8.38%

Total yearly yield to maturity = (1.0419)2-1 = 8.55%

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