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Linda_us, Finance, Accounts & Homework Tutor
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For Linda A ten-year bond pays 11% interest on a $1000 face

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For Linda

A ten-year bond pays 11% interest on a $1000 face value annually. If it currently sells for $1,195, what is its approximate yield to maturity? (Show all work/calculations/formulas)
Submitted: 6 years ago.
Category: Homework
Expert:  Linda_us replied 6 years ago.
If I solve it in Excel will that be sufficient. I will let you know the formula used in excel and how you derive.


Edited by Linda on 7/26/2010 at 10:35 PM EST
Customer: replied 6 years ago.

It should suffice. Let me show you what I came up with and see if we agree.



Approximate yield to maturity will be that Y' =

$1,195 = 110/(1+i) + 110/(1+i)^2 + ... + 110/(1+i)^10 + 1000/(1+i)^10

Solving for Y gives: Y = 0.0808303

Answer = 8.08% or rounded up to Y' = 8.10%.

Expert:  Linda_us replied 6 years ago.

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