Question

Yield to Maturity and Current Yield

You just purchased a bond that matures in 5 years. The bond has a face value of $1,000 and has an 8% annual coupon. The bond has a current yield of 8.21%. What is the bond's yield to maturity? Round your answer to two decimal places.

Answer #1

Current Yield = Annual Coupon Payment / Current Market Price

8.21 % = ( $ 1,000 * 8%) / Current Market Price

Current Market Price = $ 80 / 8.21%

= $ 974.4214373

= $ 974

The Approximate Yield to Maturity Formula =[Coupon + ( Face Value - Market Price) / Number of years to maturity] / [( Face Value + Market Price)/2 ] *100

= [$ 80+ ( $ 1,000- $ 974.4214373) /5] /[( $ 1,000+ $ 974.4214373)/2] *100

= 85.11571254/987.2107187*100

= 8.621838371%

Note : Coupon = Rate * Face Value

= 8% * $ 1,000

= $ 80

Since this formula gives an approximate value, the financial calculators can be used alternatively.

where,

Par Value = $ 1,000

Market Price = $ 974.4214373

Annual rate = 8% and

Maturity in Years = 5 Years

Hence the yield to maturity = 8.66%

Hence the correct answer is
**8.66%**

yield to maturity- you just purchased a bond which matures in 8
years. the bond has a face value if $1,000 and a 6.25% annual
coupon rate. the bond has a current yueld of 7.29%. what is the
YTM

Problem 5-14
Current Yield with Semiannual Payments
A bond that matures in 7 years sells for $1,020. The bond has a
face value of $1,000 and a yield to maturity of 10.5883%. The bond
pays coupons semiannually. What is the bond's current yield? Do not
round intermediate calculations. Round your answer to two decimal
places.
%

An 8% semiannual coupon bond matures in 5 years. The bond has a
face value of $1,000 and a current yield of 8.3765%.
What is the bond's price? Do not round intermediate calculations.
Round your answer to the nearest cent.
$
What is the bond's YTM? (Hint: Refer to Footnote 7 for the
definition of the current yield and to Table 7.1.) Do not round
intermediate calculations. Round your answers to two decimal
places.
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PRICE AND YIELD
An 8% semiannual coupon bond matures in 6 years. The bond has a
face value of $1,000 and a current yield of 8.4446%.
What is the bond's price? Do not round intermediate calculations.
Round your answer to the nearest cent.
$
What is the bond's YTM? (Hint: Refer to Footnote 7 for the
definition of the current yield and to Table 7.1.) Do not round
intermediate calculations. Round your answers to two decimal
places.

A 7% semiannual coupon bond matures in 5 years. The bond has a
face value of $1,000 and a current yield of 7.4352%.
a. What is the bond's price? Do not round intermediate
calculations. Round your answer to the nearest cent.
b. What is the bond's YTM? Do not round intermediate
calculations. Round your answers to two decimal places.

Problem 7-13
Price and yield
An 7% semiannual coupon bond matures in 4 years. The bond has a
face value of $1,000 and a current yield of 7.4538%.
a.What is the bond's price? Round your answer to the nearest
cent.
$
b.What is the bond's YTM? (Hint: Refer to Footnote 7 for
the definition of the current yield and to Table 7.1.) Round your
answers to two decimal places.
%

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a face value of $1,000 and a current yield of 8.2761%.
What is the bond's price? Do not round intermediate
calculations. Round your answer to the nearest cent.
$

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What is the bond's price? Do not round intermediate calculations.
Round your answer to the nearest cent.
$
What is the bond's YTM? (Hint: Refer to Footnote 6 for the
definition of the current yield and to Table 7.1) Do not round
intermediate calculations. Round your answers to two decimal
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face value of $1,000 and a current yield of 8.1436%.
What is the bond's price? Do not round intermediate calculations.
Round your answer to the nearest cent.
$
What is the bond's YTM? (Hint: Refer to Footnote 6 for the
definition of the current yield and to Table 7.1) Do not round
intermediate calculations. Round your answers to two decimal
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%

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of the current yield and to Table 7.1) Do not round intermediate
calculations. Round your answer for the bond's price to the
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Bondâ€™s price: $ =
YTM: =

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