Bond valuation, Yield to maturity
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Hilo Inc. of Des Moines Iowa has floated some zero coupon bonds to finance it's capital expenditures. The Par Value of each bond is $1000.
a, Assuming a market price of $300 with a maturity of 30 years, determine and discuss the bonds yield to maturity.
b. Assuming a market price of $300 and a yield to maturity of 8%, determine and discuss the holding period.
c. Assuming a holding period of 10 years and a yield to maturity of 10%, determine and discuss the bonds current market price.
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Solution Summary
Calculates bond's yield to maturity, holding period and current market price.
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Hilo Inc. of Des Moines Iowa has floated some zero coupon bonds to finance it's capital expenditures. The Par Value of each bond is $1000.
The price of a zero coupon bond is
Price=( maturity Value = $1000)/ (1+YTM)^t
where YTM= yield to maturity
t= time to maturity
^ stands for raised ...
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