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Suppose that Joan just bought a 15-year bond for $913.54. The bond has a coupon rate...

  1. Suppose that Joan just bought a 15-year bond for $913.54. The bond has a coupon rate equal to 7 percent, and interest is paid semiannually. What is the bond’s yield to maturity (YTM)? If Joan holds the bond for the next three years and its YTM does not change during that period, what return will she earn each year? What portion of the annual return represents capital gains and what portion represents the current yield?
    ***NEED STEPS PLEASE***

Solutions

Expert Solution

We use the classic YTM formula, to calculate the YTM for our bond here

Face Value = 1000

Price = 913.54

Coupon rate = 7%

Paid semi annually

Hold time 15 years.

Using the above data, the YTM is 8%

jeff jeffy answered 2 years ago
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