You have three debt instruments: a simple loan for $1 million that requires a repayment of $1,009,000 in 1 year, a one -year discount bond with a face value $1000 that sells today for $990, and a one year 10%- coupon-rate bond with a face value $1000 that sells today for $990. Which one of these instruments has the highest yield to maturity? Show all your work.

You have three debt instruments: a simple loan for $1 million that requires a repayment of $1,009,000 in 1 year, a one -year discount bond with a face value $1000 that sells today for $990, and a one year 10%- coupon-rate bond with a face value $1000 that sells today for $990. Which one of these instruments has the highest yield to maturity? Show all your work.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 9P

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