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Yield to maturity

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You buy an 8 percent coupon, 10-year maturity bond for $980. A year later, the bond price is $1,100.

a. What is the new yield to maturity on the bond?
b. What is your rate of return over the year?

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Solution Summary

The solution explains how to calculate the yield to maturity on a bond and the rate of return.

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a. The YTM is the rate that will make the present value of interest and principal equal to the price today. The price is 1,100, the annual interest is $80, the principal ...

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