A 5.2% coupon bearing bond pays interest semi-annually and has a maturity of 9 years. If...
A 5.2% coupon bearing bond pays interest semi-annually and has a maturity of 9 years. If the current price of the bond is $1,118, what is the yield to maturity of this bond? (Answer to the nearest hundredth of a percent, e.g. 12.34%)
Homework Answers
Information provided:
Par value= future value= $1,000
Current price= present value= $1,118
Time= 9 years*2= 18 semi-annual periods
Coupon rate= 5.20%/2= 2.60%
Coupon payment= 0.0260*1,000= $26
The yield to maturity is calculated by entering the below in a financial calculator:
FV= 1,000
PV= -1,118
N= 18
PMT= 26
Press the CPT key and I/Y to compute the yield to maturity.
The value obtained is 1.8250.
Therefore, the yield to maturity is 1.8250%*2= 3.65%.
In case of any query, kindly comment on the solution.
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