While the current yield andyield-to-maturity (YTM)formulas may be used to calculate theyield of a bond, each method has a different application—depending on an investor’s specific goals. When a bond is issued,
Which has the higher yield to maturity: a 20-year bond selling for $800 with a current yield of 15% or a 1-year bond selling for $800 with a current yield of 5%? Explain. a. Explain the difference between interest rates and yield rates dealing with bond...
There are two main ways to determine the return of a bond:yield to maturity(YTM) and the spot rate, which in this context should be thought of as the spot interest rate. For example, the spot interest rate for Treasuries can be found on thespot rate Treasury curve. The spot in...
What is the difference between the following yields: coupon rate, current yield, yield to maturity? What is the price of a one-year $1,000 bond with a 3% coupon rate if the yield to maturity is 5.2%? What is the yield to maturity of a 10-year, $1000 bon...
If interest rates rise and the yield to maturity increases to 7.8%, what will happen to the price of the bond? a. The price of the bond wil Explain the difference between real interest rates and nominal interest rates. Based on semiannual compoundi...
If the stock price doubles to $100 and the dividend remains the same, then the yield is reduced to 2%. In bonds, the yield is expressed asyield-to-maturity (YTM). The yield-to-maturity of a bond is the total return that the bond's holder can expect to receive by the time the bon...
If this same bond is purchased for $800, then the current yield becomes 7.5% because the $60 annual coupon payments represent a larger share of the purchase price. Special Considerations A more comprehensive measure of a bond's rate of return is itsyield to maturity(YTM). Since it i...
Explain the difference between the nominal interest rate and the real interest rate. How are they related? What is the current yield on a bond? Why do interest rates change when bond prices change? What is the difference between the nominal rat...
Question: How do you determine, and whats the difference between capital gain yields, dividend yields, yield to maturity, and total returns? Return: Returns are gains or losses on an investment over a period. It is typically shown as a percentage...
What is the difference between interest rate and annual percentage rate? A $1,000 par bond with an annual coupon has only 2 years until maturity. Its current yield is 6%, and its yield to maturity is 8%. What is the price of the bon...