- This topic has 3 replies, 3 voices, and was last updated 1 year ago by
.
- Posts
Guys, anyone can explain this
Minute 31 of the video, why they have calculated the yield over 5 years not 4 years?!!!!!!Also interested in the reasoning behind this. It seems a bit ridiculous that they release pre-exam mocks without mark schemes. Appreciate they have expert tutors going through it, but usually at break-neck speeds and without much explanation as to why they’re doing things other than “because it’s correct”.
MV of the bond is calculated across 4 years without the tax-shield on interest payments.
YTM is calculated with the tax-shield on interest payments because it’s a Kd calculation.
YTM is the discount rate where the present value is equal to the MV. (Essentially IRR).Not a clue why they’ve slapped an additional year onto the four-year redeemable bonds.
This question is very identical to Kingtim in the Kaplan Revison Kit.
Not sure why that lecturer has done five years as its four years in the mark scheme.
Hope this helps
- You must be logged in to reply to this topic.