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Calculate the yield-to-maturity

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(Yield-To-Maturity) You have just bought a 9% coupon $1,000 face-value bond with 3 years until maturity for $990.

1. Construct the timeline that represents the discounted cash ?ow and write down the equation that would calculate the yield-to-maturity.

2. Use Excel to solve for the yield-to-maturity. What is the formula you would write to solve for the yield-to-maturity? 

3. You have held this bond for one year and eamed the ?rst coupon interest. Unfortunately, you have to sell this bond for $1,000 to Firm A at the end of this one-year period. Calculate the actual return.

4. What is the yield-to-maturity for Firm A who bought the bond from you in ((1)? Explain your answer.

(Hint: The answer is an exact percentage, virtually no calculation needed.)

5. Firm A then immediately sells this bond to Firm B for $1,180. What is the yield-to-maturity for Firm B? Explain your answer. (Hint: The answer is an exact percentage, virtually no calculation needed.)

Reference no: EM133269131

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