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Builtrite bonds have the following: 5 1/2% coupon, 16 years until maturity, $1000 par and are currently selling at $1024. If you purchase this bond, what would be your AYTM? 5.1% 5.3% 5.4% 5.6%

Respuesta :

Answer: Yield to maturity = 5.3%, Option (b) is correct.

Explanation:

Given that,

Coupon rate = [tex]5\frac{1}{2}[/tex]%

Time period = 16 years until maturity

Par value = $1000

currently selling at = $1024

Yield to maturity = [tex][(\frac{Face\ value}{present\ value} )^{\frac{1}{Time period} }] - 1[/tex]

= rate(16,5.5%,-1024,1000)

= 5.3%

If you purchase the bond, the AYTM is 5.3%.

What is the AYTM?

The yield to maturity of a bond is the total return of a bond that is expected if the bond is held to maturity.

The YTM of the bond can be determined using a financial calculator:

  • Cash flow in year 0 = -1024
  • Cash flow from year 1 to 16 = 5 1/2% x $1000 = $55
  • Cash flow in year 0 = 1000

YTM = 5.3%

To learn more about YTM, please check: https://brainly.com/question/26484024

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