Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Consider an 8-year, 4% quarterly coupon bond with $1,000 face value trading at $922. Which formula below can be used to compute this bond's YTM?
1
1
$1,000
$10
YTM/4
= $922
(YTM/4)(1+ YTM/4)32
(1+ YTM/ 4)32
1
$10
YTM (YTM)(1 + YTM)8
1
$1,000
= $922
(1+ YTM)8
$10
1
1
$922
= $1,000
YTM/ 4
(YTM/ 4)(1+ YTM/ 4)32
(1+ YTM/ 4)32
1
1
$922
$40
YTM/ 4
$1,000
(YTM/ 4)(1+ YTM/ 4)32
(1+ YTM/ 4)32
1
$1,000
$40
= $922
YTM/ 4
(YTM/ 4)(1+ YTM/ 4)32
(1+ YTM/ 4)32
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Transcribed Image Text:Consider an 8-year, 4% quarterly coupon bond with $1,000 face value trading at $922. Which formula below can be used to compute this bond's YTM? 1 1 $1,000 $10 YTM/4 = $922 (YTM/4)(1+ YTM/4)32 (1+ YTM/ 4)32 1 $10 YTM (YTM)(1 + YTM)8 1 $1,000 = $922 (1+ YTM)8 $10 1 1 $922 = $1,000 YTM/ 4 (YTM/ 4)(1+ YTM/ 4)32 (1+ YTM/ 4)32 1 1 $922 $40 YTM/ 4 $1,000 (YTM/ 4)(1+ YTM/ 4)32 (1+ YTM/ 4)32 1 $1,000 $40 = $922 YTM/ 4 (YTM/ 4)(1+ YTM/ 4)32 (1+ YTM/ 4)32
Expert Solution
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A financial instrument that does not affect the ownership of the common shareholders or management of the company and issue with a fixed cost is term as the bonds.

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