Business, 05.03.2020 21:55 Theivanpabloescorcia

Consider an 8% coupon bond selling for $953.10 with three years until maturity making annual coupon payments. the interest rates in the next three years will be, with certainty, r1 = 8%, r2 = 10%, and r3 = 12%. calculate the bond's (a) yield to maturity and (b) realized compound yield

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Answer from: neko64

The correct statements will be that the yield to maturity of a bond with 8% coupon will be 9.8% and the realized compound yield for such bond will be 9.9%.

Bond yields can be calculated using the simple formulas of the above asked queries in the name of Yield To Maturity and realized compound yield by putting the values in the information provided below.

Bonds are the debt securities subscribed to by such creditors who are assured of a fixed interest rate at a predetermined rate on its maturity given that the conditions of such bond are fulfilled.The Yield to Maturity can be calculated with the following formula, $\rm YTM= \dfrac {PTM+ (Future\ Value\ - Face\ Value)\ /2}{(Future\ Value+ Face\ Value)\ /2}$ Putting the values in the formula we get, $\rm YTM= \dfrac{80\ + (1000-953.1)\ /2}{(1000\ + 953.1)\ /2}$ We obtain the values as $\rm YTM= 0.098$ So, the value of Yield To Maturity interest is 9.8%.Calculating the realized compound yield, $\rm Realized\ Compound\ Yield= Present\ value\ (1 +\ y )^{2}$ We get the values as , $1268.16= 953.1\ \rm x\ (1+y)^2\\\\\\1.33 = (1 + y)^2\\\\\\1+y = 1.099$ We finally get, $\rm y = 0.099$ The realized compounded yield is 9.9%

Hence, the correct values for the Yield To Maturity is 9.8% whereas the realized compounded yield is 9.9%

To know more about bond yields, click the link below.

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Answer from: banna01man

a) YTM = 9.8%

b) realized compound yield is 9.9%

Explanation:

a) PMT = 80

par value FV = 1000

coupon rate = 8%

curent price PV = 953.1

years to maturity n = 3

Yield to maturity (YTM) = $\frac{PMT+(FV-PV)/n}{(FV+PV)/2}$ = $\frac{80+(1000-953.1)/3}{(1000+953.1)/2}$ = 9.8%

b) r2 = 10% = 100%+10%=1.1

r3 = 12% = 100%+12%=1.12

Realized compound yield:First, find the future value (FV. of reinvested coupons and principal

FV = ($80 *1.10 *1.12) + ($80 * 1.12) + $1080 = $1268.16

let a be the rate that makes the future value $1268.16

953.1(1+y)³ =$1268.16

(1+y)³=1.33

1+y=1.099

y = 0.099 = 9.9%

Answer from: Quest

i would prefer to go with the news article for nate, its recent and updated and stores a lot of information

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$527.7.if the following was the question $527.7 is the answer.students who are trying to raise funds have an agreement with a local pizza chain. the chain has agreed to sell them pizzas at a discount, which the students can then resell to families in the local community for a profit. it is expected that of the 500 families in the community, at most 70% will buy pizza. based on a survey of their personal preferences, the students believe that they should order no more than 120 cheese pizzas, no more than 150 pepperoni pizzas, and no more than 100 vegetarian pizzas. they also want to make sure that at least 20% of the total pizzas are cheese and at least 50% of the pizzas are pepperoni. they make a profit of $1.45, $1.75, and $1.98, respectively, for each cheese, pepperoni, and vegetarian pizza they resell. how many pizzas of each type should they buy?

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Consider an 8% coupon bond selling for $953.10 with three years until maturity making annual coupon...

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