Question 4 10 pts Estimate the yield to maturity of a bond that is $1,000 par,...

Question

Question

business finance

Answer 1

Answer #1

Information provided:

Par value= future value= $1,000

Current price= present value= $1,200

Time= 25 years*2= 50 semi-annual periods

Coupon rate= 10%/2= 5%

Coupon payment= 0.05*1,000= $50

The yield to maturity is calculated by entering the below in a financial calculator:

FV= 1,000

PV= -1,200

N= 50

PMT= 50

Press the CPT key and I/Y to compute the yield to maturity.

The value obtained is 4.0595.

Therefore, the yield to maturity is 4.0595%*2= 8.1190% $\rightarrow$ 8.12%.

In case of any query, kindly comment on the solution.

Answer 2

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