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Investors are flocking to high-quality bonds and pushing yields into the negative territor

Investors are flocking to high-quality bonds and pushing yields into the negative territor

Investors are flocking to high-quality bonds and pushing yields into the negative territory. While most of the negative yields are sovereign debt, about one-seventh is corporate debt. On September 30 the reported face value of negative yield debt was $11.6 trillion, down slightly from June's peak of $11.9 trillion. At this point in 2015 there was less than $3 trillion in negative-yield debt. The demand for high-quality debt is so great that some new issues are negative-yield. Others are bonds that investors have pushed prices high enough to enter negative-yield territory. Japan is the world's leader in negative yields with over $6 trillion in face value outstanding. Western Europe accounts for most of the remainder.

1. Compute the yield to maturity of a $1,000 face value 5% coupon bond selling for $874 that matures in 8 years.

A. 4.38%

B. 7.12%

C. -5.21%

D. none of these.

Abhinav 04-Dec-2019

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