Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Using the IRR func1ion in Excel, can we calculate the yield to maturity?
Expert Solution
Step 1
Yield to Maturity (YTM) is the rate of return that an investor will earn if the security is held until maturity. Therefore, we can say that YTM is the Internal Rate of Return (IRR) on the security that the investor will earn when he purchases it at the current price and receives all the cash flows until the maturity of the bond, i.e. all the coupons as well as redemption amount.
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