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  3. assume a bond has 5 years to maturity, a price of

assume a bond has 5 years to maturity, a price of 1032, a coupon rate of...

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Finance

assume a bond has 5 years to maturity, a price of 1032, a couponrate of 6%, a par value of 1000, and 1 coupon payment per year.find the bonds yield to maturity. If the number of coupon paymentsper year was 4 instead of 1, what would be the bonds new yield tomaturity

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3.8 Ratings (576 Votes)

                  K = N
Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k]     +   Par value/(1 + YTM)^N
                   k=1
                  K =5
1032 =∑ [(6*1000/100)/(1 + YTM/100)^k]     +   1000/(1 + YTM/100)^5
                   k=1
YTM% = 5.26
                  K = Nx4
Bond Price =∑ [(Quarterly Coupon)/(1 + YTM/4)^k]     +   Par value/(1 + YTM/4)^Nx4
                   k=1
                  K =5x4
1032 =∑ [(6*1000/400)/(1 + YTM/400)^k]     +   1000/(1 + YTM/400)^5x4
                   k=1
YTM% = 5.27
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