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In: Finance

Rolling Company bonds have a coupon rate of 7.80 percent, 17 years to maturity, and a...

Rolling Company bonds have a coupon rate of 7.80 percent, 17 years to maturity, and a current price of $1,276. What is the YTM? The current yield? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

Expert Solution

Information provided:

Time= 17 years

Coupon rate= 7.80%

Coupon payment= 0.078*1000= $78

Current price= present value= $1,276

Future value= 1,000

The yield to maturity is calculated by entering the below in a financial calculator:

N= 17

PMT= 78

FV= 1,000

PV= -1,276

Press the CPT key and I/Y to calculate the yield to maturity.

The value obtained is 5.2973.

Therefore, the yield to maturity is 5.30%.

Current yield is calculated using the below formula:

Current Yield= Annual interest/Current price

= $78/ $1,276

= 0.0611*100

= 6.11%

In case of any query, kindly comment on the solution.

jeff jeffy answered 1 year ago

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