EBK CFIN
6th Edition
ISBN: 9781337671743
Author: BESLEY
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 5, Problem 18PROB
Summary Introduction
Yield:
Yield is the return to be earned from an investment, if hold it for a specific period.
Yield includes payment of interest or dividend but does not include capital appreciation.
Calculate the yield as follows:
Given six months Treasury bill yield is 3.2%. Company F bonds matures in three years and yield is 5% and 7 years bonds yield is 5.8%. Bonds does not have liquidity premium.
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A Treasury bond due in one year has a yield of 5.7%; a Treasury bond due in 5 years has a yield of 6.2%. A bond issued by Ford due in 5 years has a yield of 7.5%; a bond issued by Shell Oil due in one year has a yield of 6.5%. The default risk premiums on the bonds issued by Shell and Ford, respectively, are:
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