Question

Crossfade Corp. has a bond with a par value of $2,000 that sells for $1,963.46. The bond has a coupon rate of 6.81 percent and matures in 23 years. If the bond makes semiannual coupon payments, what is the YTM of the bond?

Multiple Choice

• 6.27%

• 5.23%

• 6.97%

• 3.49%

• 6.62%

Answer 1

The YTM of the bond is computed as shown below:

Just plug the below figures in the financial calculator as follows:

PV = - 1,963.46

FV = 2,000

PMT will be

= ( 6.81% / 2 ) x 2,000

= 68.10

N will be:

= 23 x 2

= 46

Finally press YTM, it will give YTM be equal to

= 3.485 Approximately

Now we shall multiply it by 2 to get the final answer as

= 3.485 x 2

= 6.97%

So the correct answer is option of 6.97%

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