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30-year maturity bond with face value of $1,000 makes semiannual coupon payments and has a coupon rate of 8%. (Do not round intermediate calculations. Enter your answers as a percent rounded to 3 decimal places.) a. What is the yield to maturity if the bond is selling for $900?

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Answer:

The answer is 15.508%

Explanation:

The annual coupon rate is:

8% x 900 x 2 / $1,000 = 14.4%

The yield to maturity as follows:

Yield to maturity (YTM) = [Coupon payment + (Face Value - Present Value) / Time to Maturity] /  [(Face Value + Present Value) / 2]

=> YTM = [14.4% x $1,000 + ($1,000 - $900) / 30] / [ ($1,000 + $900) / 2] = 15.508%

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