Step 1:- To calculate the yield to maturity (YTM) of a bond, we can use the following formula: 𝑃 = 𝐶 /(1+ 𝑟 ) ^ 𝑛 + 𝐶 /(1+ 𝑟 ) ^ 𝑛 −1+…+( 𝐶 + 𝑀 )/(1+ 𝑟 ) ^ 𝑁 Explanation:- 𝑃 = Current price of the bond (R870) 𝐶 = Coupon payment (interest payment) per period (quarterly in this case) 𝑟 = Yield to maturity (the unknown we're trying to find) 𝑛 = Number of periods until the bond matures (12 years * 4 quarters per year = 48 quarters) 𝑀 = Face value of the bond at maturity (R1,000) Given: Coupon rate = 20% annually, which translates to 𝐶 =0.20×1000/4= 𝑅 50 per quarter. Now, we can plug these values into the formula and solve for <span style

Finance

Your business bonds feature a coupon rate of 8, 20% and pay interest every three months. Each bond is currently priced at R870, with a par value of R1,000. The bonds will mature in 12 years. What is the yield to maturity?

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Finance

Finance

Anu Bhardwaj

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