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Hello David,

Can you please explain the math portion on this question

A five-year bond provides a coupon of 5% per annum payable semiannually. Its price is 104.

What is the bond's yield? You may find Excel's Solver useful.

Answer:

The answer (with continuous compounding) is 4.07%

I performed

2.5e^-1y + 2.5e^-2y+2.5e^-3y+2.5e^-4y + 106.5e^-5y = 100

I did take ln on both sides

ln 2.5 (-1y) +ln 2.5 (-2y)+ln 2.5 (-3y) + ln2.5 (-4y) + ln 106.5 (-5y) = ln 100

I am getting answer of 0.850%.

Can you please explain the math portion on this question

A five-year bond provides a coupon of 5% per annum payable semiannually. Its price is 104.

What is the bond's yield? You may find Excel's Solver useful.

Answer:

The answer (with continuous compounding) is 4.07%

I performed

2.5e^-1y + 2.5e^-2y+2.5e^-3y+2.5e^-4y + 106.5e^-5y = 100

I did take ln on both sides

ln 2.5 (-1y) +ln 2.5 (-2y)+ln 2.5 (-3y) + ln2.5 (-4y) + ln 106.5 (-5y) = ln 100

I am getting answer of 0.850%.

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