Yield to maturity Elliot Enterprises’ bonds currently sell for $1,150, have an 11% coupon interest rate and a $1,000 par value, pay interest annually, and have 18 years to maturity.
a. Calculate the bonds’ yield to maturity (YTM).
b. Compare the YTM calculated in part a to the bonds’ coupon interest rate, and use a comparison of the bonds’ current price and their par value to explain this difference.
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