00:01
So here we have a bond, right? this is a bond that currently trades for 756 .22.
00:09
Then if we wait four years, we're going to get 1 ,000.
00:14
So what is the yield to maturity? yield to maturity is the return that we're going to get if we hold it until the bond can be cashes in.
00:23
So for a, the yield to maturity, i'm just going to call that r.
00:27
It's a rate of return calculation, basically.
00:29
Must satisfy 756 .22, 1 plus r to the power of 4 is equal to 1 ,000, right? what rate of return are we going to get if we hold this bond through to maturity? right, because there's no coupon or interest payments here, this calculation is quite reasonable, right? to get this, i'm just going to say 1 plus r to the 4 will be equal to 1 ,000 over 756 .22.
00:59
This means that r is going to equal to 1 ,000 over 756 .22 to the 1 over 4 minus 1.
01:10
Right.
01:10
That's how you wouldn't manipulate this.
01:13
Now, you can see roughly in your head, i hope, what we're going to get.
01:18
We're getting $250, basically, on $750 investment over four years...