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kramer
1 month ago
14

Jorge Cabrera paid $980 for a 15-year bond 10 years ago. The bond pays a coupon of 10 percent semiannually. Today, the bond is p

riced at $1,054.36. If he sold the bond today, what would be his realized yield

Business
1 answer:
Katen [2.9K]1 month ago
5 0

Response:

10.64%

Rationale:

To calculate the realized yield, we utilized the RATE formula, as shown in the attachment below:

<pgiven values:="">

Present value = $980

Future or face value = $1,054.36

PMT = 1,000 × 10% ÷ 2 = $50

NPER = 10 years × 2 = 20 periods

The formula is given as follows:

= Rate(NPER;PMT;-PV;FV;type)

The present value is represented as negative

After applying the formula, the realized yield comes out to be

= 5.32% × 2

= 10.64%

</pgiven>
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