Question 3. Yield. Consider a discount bond that has face value of $10000 and maturity 30...
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Question 3. Yield. Consider a discount bond that has face value of $10000 and maturity 30 years. Price of this bond is $5000. Suppose that a period is a year. a) What is the yield to maturity of this bond? Let's denote yield to maturity by y. Yield to maturity is y = b) Now consider a bond that has the same face value, but the maturity is 20. What should the price of this bond so that it has the same yield to maturity? The price of this bond is P = c) Now consider a bond with coupon payment $100, face value $7000 and maturity 30. If the price is $6000, what is they yield to maturity? This is rather complicated problem, so to solve this we will use computer. Go to wolframalpha.com. Write down the equation that yield to maturity needs to satisfy. Wolframalpha will provide you the roots of the function. Report the positive root. Yield to maturity is y= Question 3. Yield. Consider a discount bond that has face value of $10000 and maturity 30 years. Price of this bond is $5000. Suppose that a period is a year. a) What is the yield to maturity of this bond? Let's denote yield to maturity by y. Yield to maturity is y = b) Now consider a bond that has the same face value, but the maturity is 20. What should the price of this bond so that it has the same yield to maturity? The price of this bond is P = c) Now consider a bond with coupon payment $100, face value $7000 and maturity 30. If the price is $6000, what is they yield to maturity? This is rather complicated problem, so to solve this we will use computer. Go to wolframalpha.com. Write down the equation that yield to maturity needs to satisfy. Wolframalpha will provide you the roots of the function. Report the positive root. Yield to maturity is y=
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Solution b a Bond Price of a discount bond Parte Face Value of the bond 10000 Number of years till m... View the full answer
Related Book For
Introduction to Operations Research
ISBN: 978-1259162985
10th edition
Authors: Frederick S. Hillier, Gerald J. Lieberman
Posted Date:
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