Answered: You take a loan of 10lacs taka from NRB…

You take a loan of 10lacs taka from NRB Bank with a repayment agreement of 1356100 tk after 3.5 years. Compute the yield to maturity of that loan.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter2: The Domestic And International Financial Marketplace

Section: Chapter Questions

Problem 5P

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Question

. a) You take a loan of 10lacs taka from NRB Bank with a repayment agreement of 1356100 tk after 3.5 years. Compute the yield to maturity of that loan.

b) If ABC Corporation’s bond price is 400000tk and pays its bond holders 12500tk annually forever, what will be the yield to maturity of that bond?

c) If Pitter lends BDT380000 to her father and next year he wants BDT440000 back , what is the yield to maturity on this loan? Show detailed calculation and formula where necessary.

Definition Definition Calculates the present value of a bond's expected future periodic coupon payments. Bond valuation determines the theoretical fair value of a particular bond and helps investors estimate what rate of return they could expect. The bond's theoretical fair value is computed by discounting the future cash flows or coupon payments by an applicable discount rate.

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