A $1,000 par value 14-year bond with a 10 percent coupon rate (paid once per year)...

Question

Question

A $1,000 par value 14-year bond with a 10 percent coupon rate (paid once per year) recently sold for $867.44. The yield to maturity of this bond is

A) 9%.

B) 10%.

C) 11%.

D) 12%.

business finance

Answer 1

Answer #1

Annual coupon=1000*10%=100

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

=[100+(1000-867.44)/14]/(1000+867.44)/2

which is equal to

=12%

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Answer 2

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