Mature 2 And I
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Year to maturity 2 and i 3 P 501003 5010032 100010032 P 103827 Second case Year
Year to maturity 2 and i 3 p 501003 5010032 100010032
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Interested in Chapter 4 - Homework.docx
Year to maturity = 2 and i = 3% P = 50/(1+0.03) + 50/(1+0.03)^2 + 1,000/(1+0.03)^2 P = $1,038.27 Second case, Year to maturity = 2, i = 5% P = 50/(1+0.05) + 50/(1+0.05)^2 + 1,000/(1+0.05)^2 P = $1,000 Third case, Year to maturity = 3, i = 5% P = 50/(1+0.05) + 50/(1+0.05)^2 + 50/(1+0.05)^3 + 1,000/(1+0.05)^3 P = $1,000 Forth case, Year to maturity = 5, i = 3% P = 50/(1+0.03) + 50/(1+0.03)^2 + 50/(1+0.03)^3 + 50/(1+0.03)^4 + 50/(1+0.03)^5 + 1,000/ (1+0.03)^5 P = $1,091.59 Fifth case, Year to maturity = 5, i = 7% P = 50/(1+0.07) + 50/(1+0.07)^2 + 50/(1+0.07)^3 + 50/(1+0.07)^4 + 50/(1+0.07)^5 + 1,000/ (1+0.07)^5 P = $918 When the yield to maturity is greater than the coupon rate, the bond's current price is below its face value. For a given maturity, the bond's current price falls as the yield to maturity rises. For a given yield to maturity, a bond's value rises as its maturity increases. When the yield to maturity is equal to the coupon rate, a bond's current price equals its face value regardless of the number of years to maturity. Consider a bond with a 7% annual coupon and a face value of $1,200. Face value = $1,200 Coupon rate = 7%
Coupon payment = (7% * 1,200) = $84 First case, Year to maturity = 2, i = 5% P = 84/(1+0.05) + 84/(1+0.05)^2 + 1,200/(1+0.05)^2 P = $1,244.63 Second case, Year to maturity = 2, i = 7% P = 84/(1+0.07) + 84/(1+0.07)^2 + 1,200/(1+0.07)^2 P = $1,200 Third case, Year to maturity = 3, i = 7% P = 84/(1+0.07) + 84/(1+0.07)^2 + 84/(1+0.07)^3 + 1,200/(1+0.07)^3 P = $1,200.00 Forth case, Year to maturity = 5, i = 5% P = 84/(1+0.05) + 84/(1+0.05)^2 + 84/(1+0.05)^3 + 84/(1+0.05)^4 + 84/(1+0.05)^5 + 1,200/ (1+0.05)^5 P = $1,303.91 Fifth case, Year to maturity = 5, i = 9% P = 84/(1+0.09) + 84/(1+0.09)^2 + 84/(1+0.09)^3 + 84/(1+0.09)^4 + 84/(1+0.09)^5 + 1,200/ (1+0.09)^5 P = $1,106.65 When the yield to maturity is greater than the coupon rate, the bond's current price is below its face value. For a given maturity, the bond's current price falls as the yield to maturity rises. For a given yield to maturity, a bond's value rises as its maturity increases. When the yield to maturity is equal to the coupon rate, a bond's current price equals its face value regardless of the number of years to maturity.
8) Consider a coupon bond that has a par value of $800 and a coupon rate of 12%. The bond is currently selling for $896.01 and has 2 years to maturity. What is the bond's yield to maturity (YTM)?
TERMSpring '14
PROFESSOR CarterA.Doyle
TAGS Inflation
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Definition of mature verb from the Oxford Advanced Learner's Dictionary
present simple I / you / we / they mature
Extra Examples
The little garden was maturing nicely.
The teenage years cover a period in which people mature physically and emotionally.
Oxford Collocations Dictionaryadverb
fully
early
quickly
…
verb + mature
allow something to
leave something to
preposition
into
to
See full entry
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Oxford Collocations Dictionaryadverb
fully
early
quickly
…
verb + mature
allow something to
leave something to
preposition
into
to
See full entry
Word Originlate Middle English: from Latin maturus ‘timely, ripe’; perhaps related to matins.
Oxford Learner's Dictionaries Word of the Day
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Mature 2 And I
