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Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

A bond’s expected return is sometimes estimated by its YTM and sometimes by its YTC. Under what conditions would the YTM provide a better estimate, and when would the YTC be better?

Summary Introduction

To identify: The conditions in which YTM provides a better estimate and a situation when YTC would be better.

Introduction:

Yield to Maturity (YTM): It refers to the rate of interest received till the maturity of the bond by the bond holder.

Yield to Call (YTC): It refers to the rate of interest received till the bonds are being called, but before maturity of the bond.

Explanation
  • The expected return of the bond is estimated either by its YTM or YTC it depends upon the values of current interest rate and coupon rate...

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Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)