badatfinance
New member
- Joined
- Dec 21, 2009
- Messages
- 1
Hello,
Hoping you can help me, I can't seem to find straight forward answers for YTM and as I study by distance and have a huge weakness in finance.... I am in big trouble!
1.1 Solve the Following Problem
A 2-year maturity bond with a face value of $1,000 makes annual coupon payments of $80 and selling at $1,080.
a) What is the current yield of the bond?
Current Yield = Annual Bond Coupon/Current Bond Price
Current yield = 80 / 1000
= 8%
b) What is the yield to maturity (YTM) of the bond?
1080 = 80/ 1+8
???
c) What is the price of the bond if inflation is expected to increase interest rate by 2 percent?
Not sure on formula, please help?
Thanks in advance.
Hoping you can help me, I can't seem to find straight forward answers for YTM and as I study by distance and have a huge weakness in finance.... I am in big trouble!
1.1 Solve the Following Problem
A 2-year maturity bond with a face value of $1,000 makes annual coupon payments of $80 and selling at $1,080.
a) What is the current yield of the bond?
Current Yield = Annual Bond Coupon/Current Bond Price
Current yield = 80 / 1000
= 8%
b) What is the yield to maturity (YTM) of the bond?
1080 = 80/ 1+8
???
c) What is the price of the bond if inflation is expected to increase interest rate by 2 percent?
Not sure on formula, please help?
Thanks in advance.