What is the yield to maturity on the five-year bond

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You have just purchased a newly issued $1,000 five-year Troshani Company bond at par. This five-year bond pays $60 in coupon payments semi-annually. You are also considering the purchase of another Troshani Company bond that pays $30 in semi-annual coupon payments and has six years remaining before maturity. The bond also has a face value of $1,000.

(i) What is the yield to maturity on the five-year bond (expressed as an effective annual yield)?

(ii) Assume that the five-year bond and the six-year bond have the same yield. What should you be willing to pay for the six-year bond?

Reference no: EM133118765

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