Determine the yield rate j, using the method of averages. Face Value Redemption at Bond Interest Years to Redemption Purchase Price 5000 101 ji = 11.5% 4 4800

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 16P: Interest Rate Sensitivity A bond trader purchased each of the following bonds at a yield to maturity...
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Determine the yield rate ji using the method of averages.
Face Value Redemption at Bond Interest Years to Redemption Purchase Price
5000
101
j
= 11.5%
4
4800
Answer:
%
Transcribed Image Text:Previous Problem Problem List Next Problem Determine the yield rate ji using the method of averages. Face Value Redemption at Bond Interest Years to Redemption Purchase Price 5000 101 j = 11.5% 4 4800 Answer: %
Determine the yield rate j2 using linear interpolation, by first finding an approximate yield using method of
averages and then using the next lowest and highest whole percent in linear interpolation.
(i.e. if using method of averages you find j2 = 5.27%, then use j2 = 5% and j2 = 6% for linear interpolation)
Face Value Redemption at Bond Interest Years to Redemption Purchase Price
7000
102
j2
= 9.5%
10
7700
Answer:
%
Transcribed Image Text:Determine the yield rate j2 using linear interpolation, by first finding an approximate yield using method of averages and then using the next lowest and highest whole percent in linear interpolation. (i.e. if using method of averages you find j2 = 5.27%, then use j2 = 5% and j2 = 6% for linear interpolation) Face Value Redemption at Bond Interest Years to Redemption Purchase Price 7000 102 j2 = 9.5% 10 7700 Answer: %
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