The YTMs of coupon bonds are: YEAR 1 2 3 5 YTM 12 1.25% 2.25% 2.75% 4.50% 7% All bonds have a 4% coupon. What are the YTMs of the 1 through 12 year zero coupon bonds? Assume the YTMs for the 4 and 5 year zero coupon bonds are the same. Assume the YTMs for the 6 through 12 year zero coupon bonds are the same.

The YTMs of coupon bonds are: YEAR 1 2 3 5 YTM 12 1.25% 2.25% 2.75% 4.50% 7% All bonds have a 4% coupon. What are the YTMs of the 1 through 12 year zero coupon bonds? Assume the YTMs for the 4 and 5 year zero coupon bonds are the same. Assume the YTMs for the 6 through 12 year zero coupon bonds are the same.

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter11: Bond Pricing And Amortization (bonds)

Section: Chapter Questions

Problem 3R

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Suppose that all bonds have $1,000 of face value. The current prices of zero coupon bonds are as follows: $960 for a one-year bond; $910 for a two-year bond; $850 for a three-year bond. a. What is the price of a three-year bond with 8% annual coupon payment? b. What is the YTM of the two-year zero coupon bond? c. Consider the following two-year bonds: (i) a zero coupon bond as above; (ii) a bond with 6% annual coupon payment. Whose YTM is higher?
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