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Hello students, here is a question.
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A bond with a face value of $1000 and has 18 years until maturity.
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It carries a coupon rate of 9 % and sells 1081.
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So, our question is what is the current yield on the bond? so, the second is what is the yield to maturity if interest is paid once in a year? and what is the yield of maturity if interest is paid semi -annually? so, this is what we have to calculate in this.
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So, let us discuss the answer for this.
00:29
So, first we need to calculate the pv factor, calculation of pv.
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So, to calculate this pv, we have a formula that pv is equal to c divided by 1 plus r to the power 1 plus c divided by 1 plus r to the power 2 plus goes on up to c divided by 1 plus r to the power n plus f divided by 1 plus r to the power n.
01:02
So, where pv is a present value and c is an annual coupon payment, r is the rate yield to maturity and n is the number of years.
01:11
So, now let us plug down the values based on the information provided in the question...
