Fantastic Beasts and Where toConnect bond with x e Secure ht

Fantastic Beasts and Where toConnect bond with x e Secure https://ne ucation.com/flow/connect.html Check my work mode : This shows what is correct or incorrect for the work you have completed so far. it does not indicate completion 4 Consider a coupon bond with a $1,000 face value and a coupon payment equal to 5 percent of the face value per year a. If there is one year to maturity, find the yield to maturity if thelprice of the bond is $990. Instructions: Enter your response as a percent rounded to one decimal place. The yield to maturity is b. Explain why finding the yield to maturity is difficult if there are two years to maturity and you do not have a financial calculator. 10 The value of future coupon payments is unknown There is not enough data to complete the calculation. The presence of the quadratic term makes this calculation more difficult without a calculator. Prev 4 of 20 Next >

Solution

1.

Yield to maturity is the rate of return the investor will get if he/she hold the bold till maturity period

So YTM is like internal rate of return, if we discount all the cash inflow from the bond using YTM, the present value will be equal to the bond current price.

YTM is calculated using Excel, the function used is (IRR)

Pls refer below table

Year

Cash flow

Amount

0

Bod price (Outflow)

-990

1

Par + Coupon (Inflow

1050

YTM

6.06%

Formula

=IRR(G44:G64)

YTM = 6.06%

2.

If we do not have the financial calculator, we need to use trial and error method, that is time-consuming and tedious.

So the correct answer is C.

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Year	Cash flow	Amount
0	Bod price (Outflow)	-990
1	Par + Coupon (Inflow	1050
	YTM	6.06%
	Formula	=IRR(G44:G64)