# Finance

posted by .

Yield to maturity (YTM) is the calculation utilizing the current price of the investment, the coupon cash flows and the par amount at maturity. However, the mathematics of the YTM calculation is virtually wrong or incorrect in the real world for coupon bonds greater than zero (non-zero coupon bonds). Which statement below best describes this incorrect math formula? (Points: 4)
Coupon payments every 6 months might be small and therefore, cannot be reinvested in an efficient manner.
Interest rates at the time of the coupon payments will not be identical to YTM rate calculated.
The dynamics of the real world markets and the supply and demand for borrowing and lending almost predict that rates will be different on the coupon dates than the YTM calculation assumes.
This is the best math formula we have; and universally accepted.
All of the above statements are correct.

## Similar Questions

1. ### Capital Markets - Bonds

You are buying right now a zero-coupon bond. It has exactly 8 years to maturity, and you expect the YTM to be 6% over the bondâ€™s life. Even though you intended to hold it to maturity, you end up selling it after 3 years. By that …
2. ### Math

Bond Yields. An AT&T bond has 10 years until maturity, a coupon rate of 8 percent, and sells for \$1,100. a. What is the current yield on the bond?
3. ### FINANCE

Current yield and yield to maturity A bond has a \$1,000 par value, 10 years to maturity, a 7 percent annual coupon, and sells for \$985. a. What is its current yield?
4. ### Finance

Dahler Corporation has just issued a bond with a maturity of 20 years, coupon rate of 10.25%, and a market price of \$1330.25. Dahler makes semiannual coupon payments. a) what is the YTM expressed as a quoted rate based on semi-annual …
5. ### Finance

A bond has a \$l000 par value, l0 years to maturity, a 7 percent annual coupon, and sells for \$985. a. What is its current yield?
6. ### Finance

I missed one day of class and now i cannot figure this out... I thought that price and YTM relied on each other and now I have a question asking to solve for each?
7. ### Finance

Which of the following statments is CORRECT?
8. ### Finance

2. You are now considering adding a corporate bond to your investment portfolio. The bond was issued last year to have 10 years to maturity (so it has 9 years remaining to maturity from today) The bond has an 8% coupon, and was sold …
9. ### finance

Coles Inc's bonds currently sell for \$1,180 and have a par value of \$1,000. The pay a \$65 annual coupon and have a 15 year maturity, but they can be called in 5 years at \$1,100. What is their yield to maturity (YTM)?
10. ### financial analysis

A zero coupon bond with a par value of 1,000 has 15 years to maturity. If the YTM is 6.2% what is the current price of this bond?

More Similar Questions

Post a New Question