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What is the yield to maturity of the bond

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Reference no: EM133332014

Questions: Oakland Corporation Aaron buys a new bond (issued by Oakland Corporation) for $1,090. The bond is a 25-year bond with a $1,000 face value, 7.6% coupon that pays interest quarterly.

Oakland has established a sinking fund where they contribute money every month so that they can pay face value when it becomes due at the time of maturity. That sinking fund established at Citi Bank pays interest at 3.6% compounded monthly.

  1. How much money does Oakland deposit every month towards the sinking fund?
  2. What is the Yield to Maturity of the bond?
  3. Aaron keeps the bond for 6 years and sells it to Brenda. At the time of the sale the yield to maturity of the bond was 10%. What is the Holding Period Yield earned by Aaron?
  4. Brenda keeps the bond for 7 years and sells it to Christopher for $850. What is the Holding Period Yield earned by Brenda?
  5. What is the yield to maturity of the bond at the time when Christopher bought the bond?

 

Reference no: EM133332014

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