Question

The following bond quote from FINRA is for a Wal-Mart bond with 26 years remaining to maturity (assume this bond pays semi-annual coupons). Company (Ticker): Wal-Mart Stores, Inc (WMT) Coupon: 5.250 Maturity: Dec 10, 2038 Last Price: 109.432 What is the yield-to-maturity on this bond?

a. 4.62%

b. 5.25%

c. 4.93%

d. 4.81%

e. 2.63%

Answer 1

Bond price =C*[1-(1+YTM)^-n / YTM] + [P/(1+YTM)^n]
Where,
C= Coupon amount
YTM = Yield To maturity
n = Number of periods
P= Par value
$109.432=2.625 * [1 - (1 + YTM)^-52 / YTM] + [100 / (1 + YTM) ^52]
$109.432/2.625 =[1 - (1 + YTM)^-52 / YTM] + [100 / (1 + YTM) ^52]
41.68889 =[1 - (1 + YTM)^-52 / YTM] + [100 / (1 + YTM) ^52]
YTM =	2.31%
Annually =2.31%*2
	=4.62%
Correct Option = a.4.62%