How can I solve this problem without knowing the face value of the bond?
A bond has 10 years until maturity, a coupon rate of 8%, and sells for $ 1,100.
a. What is the current yield on the bond?
b. What is the yield to maturity?
Bond best answer:
Answer by muncie birder
All bonds have a face value of $ 1000 when discussing bonds of a commercial nature.
a. current yield is .08/1.1 = .07273
b. is best figured out with a financial calculator, but it is going to be about 10% less than current yield, because at maturity one receives only $ 1000 but has paid $ 1100, so will forfeit $ 100 at maturity.
Bond
PJ Bond @ Fest 10 - 10.28.11-14
Image by elawgrrl
PJ Bond plays the Civic Media Center for Fest 10, Gainesville, FL, October 28, 2011.
Note: Please share, download and use these photos for non-commercial purposes but be sure to abide by the creative commons license by crediting the photos to Nicole Kibert / www.elawgrrl.com and if using online, add a link back to this page or to www.elawgrrl.com. This license does not permit commercial use without my permission. Thanks.
Orignal From: How can I solve this problem without knowing the face value of the bond? and PJ Bond @ Fest 10 - 10.28.11-14
No comments:
Post a Comment