Respuesta :
Answer:
Explanation:
What is given:
FV=1000
PV=887.52
n=11
PMT(coupon) = 0.055*1000 = 55 or C in the formula
Need to find YTM?
Formula to be used is YTM = [C+ (F-P) / n] / [(F+P) / 2]
YTM = [55 + (1000-887.52)/11]/[(1000+887.52)/2)] = [55+10.225]/[943.76]=0.069=6.9%
Answer: 1.09% per annual
Explanation: firstly we are given the face vale of the bond which is $1000
thereafter we are also given the number of years it takes for this bond to mature which is 11 years that is our n in the formula. we are also given the current price of the bond which is $887.52 which these values we can use to calculate the yield to maturity which is a percentage it can take to mature.
we then use the formula for the yield to maturity that comes from the formula: [tex]Face Value=Current Price(1+YTM)^n[/tex]
so we rearrange it so that the YTM( yield to maturity) can be the subject of the equation as its the unknown value we are looking for:
[tex]YTM= n\sqrt[n]{Face value/ current price} -1[/tex]
YTM = [tex]\sqrt[11]{$1000/$887.52} -1[/tex]
Yield to maturity is 0.01090670576 which is rounded off to 1.09% per annum.
