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A bond with exactly five years until maturity paying 6% p.a. coupons semi-annually and with a...

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Finance

A bond with exactly five years until maturity paying 6% p.a.coupons semi-annually and with a face value of $100 was purchasedat a yield of 6.5% p.a. The bond was sold exactly two years laterfor a yield of 5% p.a. All coupons were reinvested at 6% p.a.Calculate the realised yield-to-maturity on this bond.A bond withexactly five years until maturity paying 6% p.a. couponssemi-annually and with a face value of $100 was purchased at ayield of 6.5% p.a. The bond was sold exactly two years later for ayield of 5% p.a. All coupons were reinvested at 6% p.a. Calculatethe realised yield-to-maturity on this bond.

Answer & Explanation Solved by verified expert
4.3 Ratings (887 Votes)
First we need to find the purchase price of bondFace value 100 Coupon rate 6 pa semi annually Years tomaturity 5 Yield to maturity 65As the bond pays coupons semiannually thereforeSemi annual coupon payment Coupon rate x face value 2 6 x 100 2 62 3Semi annual yield to maturity Yield to maturity 2 65    See Answer
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