Question
In: Finance
Beulah buy a portfolio consisting of a 6 month Zero Coupon Bond with maturity value of...
Beulah buy a portfolio consisting of a 6 month Zero Coupon Bond with maturity value of $1,000 and a 1-year Zero Coupon Bond with maturity value of $2,000. If she paid $2766.44 for the portfolio then, algebraically find the yield to maturity of the portfolio. Your answer should be correct to 3 places after the decimal point and stated as per annum compound semiannually. Yield_____
Solutions
Expert Solution
Let ytm for semi-annual period be r,
2,766.44 = 1,000/(1 + r) + 2,000/(1 + r)2
r = 5.00%
Yield to Maturity = 10.00%
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