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17 November, 03:28

Dyl Inc.'s bonds currently sell for $1,040 and have a par value of $1,000. They pay a $65 annual coupon and have a 15-year maturity, but they can be called in 5 years at $1,100. What is their yield to maturity (YTM) ?

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  1. 17 November, 07:11
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    Their yield to maturity (YTM) is 6.11%

    Explanation:

    Yield to maturity is the annual rate of return that an investor receives if a bond bond is held until the maturity.

    Face value = F = $1,000

    Coupon payment = $65

    Selling price = P = $1,040

    Number of periods = n = 15 years

    Yield to maturity = [ C + (F - P) / n ] / [ (F + P) / 2 ]

    Yield to maturity = [ $65 + ($1,000 - $1,040) / 15 ] / [ (1,000 + $$1,040) / 2 ]

    Yield to maturity = [ $65 - 2.67 ] / $1,020 = $62.33 / $1,020 = 0.0611 = 6.11%
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Home » Business » Dyl Inc.'s bonds currently sell for $1,040 and have a par value of $1,000. They pay a $65 annual coupon and have a 15-year maturity, but they can be called in 5 years at $1,100. What is their yield to maturity (YTM) ?
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