Question
In: Finance
Calculate an approximation of the yield to maturity (using thecurrent yield) of a20-year coupon...
Calculate an approximation of the yield to maturity (using the current yield) of a
20-year coupon bond with face value of 10,000$ and coupon rate of 5% per year;
assume that its price today is 3,000$.
Solutions
Expert Solution
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N = 20 (The Bond is for 20 Years)
PV = -3000 (The present value of the bond is $3,000)
PMT => 5% of 10,000 = 500 ( The coupon 5% is on Face Value)
FV = 10,000 (The Face value of bond is $10,000)
CPT + I/Y = 18.21
The current yield of the bond is 18.21%
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