Evaluate the yield to maturity on the bond

Reference no: EM1343961

It is important to know what the standard rates are. Look at MoneyCafe. Read through the definitions and report the rates for each: Prime Rate, 1 Year Treasury, LIBOR, and Certificates of Deposit Index.

Go to FINRA and enter your information. Using the chart, determine what you would have to earn on a taxable bond to get a tax-free bond at 5%.
Go to Yahoo.com, click on Yahoo Finance, enter Coke in the "symbol(s)" search box.
Step (a): Record the last closing price (for example, Previous Close - yesterday's closing price)
Step (b): Record the change (Current Price minus Prev Close) for the day (up or down and how many dollars & cents)
Step (c): Divide your change for the day (from b above) by the last closing price (from a above). The result is typically something like 0.1234 or 0.0123. Convert the decimal to percent (such as 12.34 or 1.23%).
Example:
Step (a): Last closing price (Previous Close) of Coke = 66.26
Step (b): Change for the day (up or down) = -$.05
Step (c): Divide (b) by (a) = -$.05/$66.26 = 0.00075 = -.08% <-- R.O.I. in percent.

Evaluate the Yield to Maturity on the following bond. I can buy a $1,000 bond for $900. I get $50 a year and it matures in 20 years. Remember this is a time value of money problem, so you need to use your financial calculator or Excel.

Reference no: EM1343961

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