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Explanation:
Answer:
a) YTM = 9.8%
b) realized compound yield = 9.9%
Explanation:
a) PMT is 80
par value FV = 1000
coupon rate = 8%
current price PV = 953.1
years to maturity n = 3
Yield to maturity (YTM) is calculated as
=
= 9.8%
b) r2 = 10% = 100%+10% = 1.1
r3 = 12% = 100%+12% = 1.12
To find the realized compound yield, we first need the future value (FV) of the principal and reinvested coupons.
FV = ($80 * 1.10 * 1.12) + ($80 * 1.12) + $1080 = $1268.16
Let a be the rate at which the future value equals $1268.16.
953.1(1+y)³ = $1268.16
(1+y)³ = 1.33
1+y = 1.099
y = 0.099 = 9.9%
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Answer:
The solution and relevant data for the exercise are contained within three images. The maximum profit amounts to 262.500.
Explanation
Please take into account the details provided in the exercise. Should you have any queries, feel free to reach out again. All the exercises are illustrated within three images.