>Hi,
>
>I am trying to understand the Yield to Maturity of a bond. Conceptually I understand it. But I cannot figure out how the following example works (I found this example on a reputable - as far as I know - site).
>
>The purchase price of a bond is $900. Maturity 5 years. Face amount $1000 (I think it is also called par). Coupon is 2%.
>
>So the bond earns (by years)
>
>Yr 1 Yr 2 Yr 3 Yr 4 Yr 5
>$20 $20 $20 $20 $1020 (coupon + principle)
>
>then they say that the Yield to Maturity of this bond is 4.27%.
>
>How do they calculate the 4.27%?
I don't think it answers your question directly, but this link gives the basics. With that you should be able to Google the answers you need:
http://www.investopedia.com/university/advancedbond/advancedbond2.asp
Regards. Al
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