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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.

Solution Preview

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 ...

Solution Summary

Calculates bond's yield to maturity, holding period and current market price.

\$2.19