Bill paid 450 for a 3-year bond with coupon payments of 20, Ask an Expert

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Bill paid $450 for a 3-year bond with coupon payments of $20 and a face value of $500.

a) What is the formula to compute the yield to Maturity of this bond purchase for Bill?

b) Would the yield to maturity be higher or lower if Bill had paid $470 for the bond instead of $450?

c) Assume Bill purchased the bond for $450. After one year, Bill collects his first coupon payment of $20, but then sells the bond for $440. What is Bill’s rate of return?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92312992

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