babygirl1501
New member
- Joined
- Jul 1, 2010
- Messages
- 13
An investor is interested in purchasing a new 20 year government bond carrying a 10 percent annual coupon rate with interest paid twice a year. The bond’s current market price is 875.00 for a 1000.00 par value instrument. If the investor buys the bond at the going price and holds to maturity, what will be his or her yield to maturity? Suppose the investor sells the bond at the end of year 10 years for 950.00. What is the investor’s holding- period yield?
n= 40 periods because 20 years * interest pd twice a year
K= 2 because of twice year
C=coupon rate *par value so .10* 1000=100
C =100/2 = $50
C=50.00
M=1000
I can't fingure out how it impute this information to get the yeild. Can someone explain how I would calculate the yeild?
I know the formula is this P=C/k/(1+y/k)^1 + C/k/(1+y/k)^2+ C/k/(1+y/k)^3+....+ C/k/(1+y/k)^nk +M/ (1+y/k)^nk
What I don't understand times I put the equation across as C/k/(1+y/k)^1 and raised to the 2nd and so forth until i raise it to the nk. I also don't understand how we calculate for y. Can someone please explain it to me?
n= 40 periods because 20 years * interest pd twice a year
K= 2 because of twice year
C=coupon rate *par value so .10* 1000=100
C =100/2 = $50
C=50.00
M=1000
I can't fingure out how it impute this information to get the yeild. Can someone explain how I would calculate the yeild?
I know the formula is this P=C/k/(1+y/k)^1 + C/k/(1+y/k)^2+ C/k/(1+y/k)^3+....+ C/k/(1+y/k)^nk +M/ (1+y/k)^nk
What I don't understand times I put the equation across as C/k/(1+y/k)^1 and raised to the 2nd and so forth until i raise it to the nk. I also don't understand how we calculate for y. Can someone please explain it to me?