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Determine the implied semiannual yield to maturity

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Point 1: The Great Northern Specific Railway has noncallable, perpetual bonds outstanding. When originally issued, the perpetual bonds sold for $955 per bond; today (January 1) their current market price is $1,120 per bond. The company pays a semiannual interest payment of $45 per bond on June 30 and December 31 each year.

Point 2: Assume that everything stated remains the same except that the bonds are not perpetual. Instead, they have a $1,000 par value and mature in 10 years.

Question 1: Determine the implied semiannual yield to maturity (YTM) on these bonds.

Question 2: Using your answer to Part (a), what is the (nominal annual) YTM on these bonds? The effective annual YTM on these bonds?

Reference no: EM132503674

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