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Home Q & A Board Science-Related Homework Help Mathematics
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majarm majarm
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6 years ago
A $100 000, 8% bond with semi-annual coupons redeemable at par on April 25, 2018, was purchased on June 25, 2009, at 94.125. What was the approximate yield rate?
Textbook 
Contemporary Business Mathematics with Canadian Applications

Contemporary Business Mathematics with Canadian Applications


Edition: 11th
Authors:
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#1
6 years ago
Quoted price = 100000(0.94125) = $94 125.00
Redemption price = $100000.00
Average book value = .5(100000.00 + 94125.00) = $97 062.5
Total interest = 18(100000.00)(.04) = $72 000.00
Bond discount = 100000.00 - 94125.00 = $5 875.00
Average income per payment interval =  (72000.00 + 5875.00 ) = $4326.39
Approximate value of i =   = .044573239
Approximate yield = .044573239 * 2 = 8.1946%
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