Question

Springfield Nuclear Energy Inc. bonds are currently trading at ​786.82. The bonds have a face value...

Springfield Nuclear Energy Inc. bonds are currently trading at

​786.82.

The bonds have a face value of

​1,000​,

a coupon rate of

2%

with coupons paid​ annually, and they mature in

20

years. What is the yield to maturity of the​ bonds?

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Answer #1

Annual coupon=1000*2%=20

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

=[20+(1000-786.82)/20]/(1000+786.82)/2

=3.50%(Approx).

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