OID SIOWs What is correct and incorrect for the work you have completed so far f
ID: 2792993 • Letter: O
Question
OID SIOWs What is correct and incorrect for the work you have completed so far f all of the work you have done so far is correct, you may not have completed everything value: 10.00 points Suppose the following bond quotes for IOU Corporation appear in the financial page of today's newspaper. Assume the bond has a face value of $1,000 and the current date is April 15, 2016. (Do not round intermediate calculations. Round the final answers to 2 decimal places.) ompany EST Vol (Ticker)Coupon MaturityLast Price t ield EST Spread UST (0005) OU (IOU)6.9 Apr 15, 2026 108.27 477 10 1,977 What is the yield to maturity of the bond? YTM What is the Equivalent Government Bond Yield? Bond yield 580 0% 5 88 % Type here to search hpExplanation / Answer
This formula works for most problems where maturity is over 182 days. Here number of days to maturity is n= 3652 days.
BEY = [(-2n/365) + 2* [(n/365)2 + (2n/365 - 1) * (n * Yield / (360 - (n*yield)))]0.5]/ (2n/365 -1)
= [(-2*3652/365) + 2* [(3652/365)2 + ( 2*3652/365 - 1 ) * (3652 * 0.058 / (360 - (3652*0.058)))]0.5]/ (2*3652/365 -1)
= [-2* 10.00547945 + 2* [ 100.1096 + (19.0109589 * ( 211.816 / (360 - (211.816))))]0.5]/ 19.0109589
=[-2 * 10.00547945 + 2* [ 100.1096 + ( 19.0109589 * 1.4294)]0.5]/ 19.0109589
=[-2 * 10.00547945 + 2* 11.27716695]/ 19.0109589 = 0.1342958 = 13.43%
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