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There is a bond that has a quoted price of 106.818 and a par value of $2,000. The coupon rate is 7.11 percent and the bond matures in 17 years. If the bond makes semiannual coupon payments, what is the YTM of the bond

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truonghanhduyen

Answer:

18.81%

Explanation:

Current value of bond: $106.818

Face value: $2,000

coupon rate is 7.11%

tenor (n): 17 years

Current value of bond = Face value/(1+ YTM)^n

-> YTM = (Face value/Current value)^(1/n)-1

= (2000/106.818)^(1/17)-1 = 18.81%

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