Question

1.

Number of Years to Maturity = 10

PMT = 9%*5000 = \$450

Par Value= \$5000

Market Price = \$6500

Yield = (PMT + (Par Value - Market Price)/Number of Years to Maturity) / ((Par Value + Market Price)/2)

= (450 + (5000 - 6500)/10) / ((5000 + 6500)/2) = 0.0522 or 5.33%

2.

Number of Years to Maturity = 25

PMT = 12%*1000 = \$120

Par Value= \$1000

Market Price = \$1760

Yield = (PMT + (Par Value - Market Price)/Number of Years to Maturity) / ((Par Value + Market Price)/2)

= (120 + (1000 - 1760)/25) / ((1000 + 1760)/2) = 0.0649 or 6.49%

3.

Number of Years to Maturity = 5

PMT = 10%*1000 = \$100

Par Value= \$1000

Market Price = \$1000

Yield = (PMT + (Par Value - Market Price)/Number of Years to Maturity) / ((Par Value + Market Price)/2)

= (100 + (1000 - 1000)/5) / ((1000 + 1000)/2) = 0.10 or 10%

4.

Number of Years to Maturity = 20

PMT = 6%*1000 = \$60

Par Value= \$1000

Market Price = \$650

Yield = (PMT + (Par Value - Market Price)/Number of Years to Maturity) / ((Par Value + Market Price)/2)

= (60 + (1000 - 650)/20) / ((1000 + 650)/2) = 0.0939 or 9.39%

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