Briefly describe the term bond-equivalent yield. Is there any difference between promised yield and bond-equivalent yield? Explain.
Answer to relevant QuestionsWhy is the reinvestment of interest income so important to bond investors? What is the current yield for a $1,000 par value bond that pays interest semiannually, has 9 years to maturity, and is currently selling for $937 with a bond equivalent yield of 12%? Assume that an investor is looking at 2 bonds: Bond A is a 20-year, 9% (semiannual pay) bond that is priced to yield 10.5%. Bond B is a 20-year, 8% (annual pay) bond that is priced to yield 7.5%. Both bonds carry 5-year call ...An investor wants to find the duration of a 25-year, 6% semiannual-pay, noncallable bond that’s currently priced in the market at $882.72, to yield 7%. Using a 50 basis point change in yield, find the effective duration of ...A $1,000 par value bond with an 8% coupon rate (semiannual interest) matures in 5 years and currently sells for $1,200. What is the bond’s yield to maturity?
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