Please solve with the below formula in the example don't use excel. Thanks ...
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Please solve with the below formula in the example don't use excel. Thanks
1. An issuer has the following bonds outstanding: Bond A Maturity (yrs) 3 5 Coupon (%) 5.50 4.50 Price 107.500 104.750 B Calculate the market discount rate implied in the pricing (also called yield to maturity, or YTM) of both bonds. Assume coupons are paid annually. EXAMPLE 2 Yields-to-Maturity for a Premium, Discount, and Zero-Coupon Bond Calculate the yields-to-maturity for the following bonds. The prices are stated per 100 of par value. Coupon Payment Bond per Period Number of Periods to Maturity 4 Price A 3.5 2.25 103.75 96.50 B 6 0 60 22.375 Solutions: Bond A 3.5 3.5 3.5 103.5 103.75= + + + r=0.02503 (1+r)" *(1+r)2 + (1+r)3 * (1+r)*' Bond A is trading at a premium, so its yield-to-maturity per period (2.503%) must be lower than its coupon rate per period (3.5%)
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