Calculate the yield to maturity on august

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a) Calculate the yield to maturity (as an APR!) on August 5th, 2019 for a 4.5% coupon bond (APR) that makes semi-annual payments, was bought on August 5th, 2019 for $1,080, matures on August 1st, 2023, and has a redemption or face value of $1,000. Do the calculation with the "BOND" function on your financial calculator. Show how you entered the information into each variable (note: use 360 for the day count method).

b) Keep all the information you just entered in the BOND function, and scroll down to the "AI" variable. What number do you see in the "AI" variable? Explain what "AI" means and why it is not zero? Explain the difference between the "clean" and the "dirty" price. What was the dirty price on August 5th, 2019 for this bond?

c) As you know, the yield to maturity and the bond price are inversely related. As one moves up, the other moves down. But which one moves first, the YTM or the price? Explain your answer.

Reference no: EM132459730

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