A bond has $1,000 par value, 20 years to maturity, a 8% annual coupon and sells...

Question

Question

A bond has $1,000 par value, 20 years to maturity, a 8% annual coupon and sells for $925.00. What is the yield to maturity?

business finance

Answer 1

Answer #1

Annual coupon=1000*8%=80

Approx Yield to maturity=[Annual coupon+(Face value-Present value)/time to maturity]/(Face value+Present value)/2

=[80+(1000-925)/20]/(1000+925)/2

which is equal to

=8.81%(Approx).

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Answer 2

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