What is the ytm

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Stone Sour Corp. issued 15-year bonds 2 years ago at a coupon rate of 9.10 percent. The bonds make semiannual payments. If these bonds currently sell for 103 percent of par value, what is the YTM?

Treasury bills are currently paying 6 percent and the inflation rate is 3.30 percent.

What is the approximate real rate of interest?
What is the exact real rate?


An investment offers a 14 percent total return over the coming year. Fred Bernanke thinks the total real return on this investment will be only 8 percent.

What does Fred believe the inflation rate will be over the next year?


Bond J is a 6 percent coupon bond. Bond K is a 12 percent coupon bond. Both bonds have 20 years to maturity, make semiannual payments, and have a YTM of 9 percent.

If interest rates suddenly rise by 2 percent, what is the percentage price change of these bonds?

Percentage change in price of Bond J %
Percentage change in price of Bond K %

What if rates suddenly fall by 2 percent instead?

Percentage change in price of Bond J %
Percentage change in price of Bond K %

Martin Software has 9.2 percent coupon bonds on the market with 18 years to maturity. The bonds make semiannual payments and currently sell for 107.4 percent of par.

What is the current yield on the bonds?

What is the YTM?

What is the effective annual yield?

The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY).

a.
Suppose that today you buy a bond with an annual coupon of 7 percent for $1,160. The bond has 15 years to maturity. What rate of return do you expect to earn on your investment?

b1.
Two years from now, the YTM on your bond has declined by 1 percent, and you decide to sell. What price will your bond sell for?

b2. What is the HPY on your investment?

Reference no: EM13699870

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