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One year ago, you bought the ABC bond with a maturity of 30 years for $980....

One year ago, you bought the ABC bond with a maturity of 30 years for $980. The bond’s capital gains yield is -0.3% as of today. The bond’s coupon rate is 7.0% with semiannual payment of coupon. What is the YTM for the bond as of today?

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Expert Solution

ANSWER DOWN BELOW. FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE.

annual coupon payment = 70

Current market price = 980

Current yield of a bond = (annual coupon payment)/(current market price)

=70/980

=

=7.1429% (answer).

Capital gain Yield+Current Yield = YTM

YTM = -0.3% +7.1429%

YTM = 6.8429%

jeff jeffy answered 2 years ago
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