5) (3 pts) You buy a $1000 face value bond that matures in 3 years, pay...
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5) (3 pts) You buy a $1000 face value bond that matures in 3 years, pay a 5% annual coupon and are priced at $970. a. What is the Yield to maturity of these bonds? YTM = % b. What is your realized compound yield if hold the bond to maturity and you reinvest the coupons at the following rates: Year 1 coupon is re-invested in a 2 year CD paying 4.0% Year 2 coupon is re-invested in a 1 year CD paying 4.5% Realized compound Yield = % 5) (3 pts) You buy a $1000 face value bond that matures in 3 years, pay a 5% annual coupon and are priced at $970. a. What is the Yield to maturity of these bonds? YTM = % b. What is your realized compound yield if hold the bond to maturity and you reinvest the coupons at the following rates: Year 1 coupon is re-invested in a 2 year CD paying 4.0% Year 2 coupon is re-invested in a 1 year CD paying 4.5% Realized compound Yield = %
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