Question

Skolits Corp. issued 15-year bonds 2 years ago at a coupon rate
of 8.8 percent. The bonds make semiannual payments. If these bonds
currently sell for 109 percent of par value, what is the YTM?
**(Do not round intermediate calculations. Enter your answer
as a percent rounded to 2 decimal places, e.g.,
32.16.)**

YTM
%

Answer #1

ANSWER = 7.7%

EXPLANATION:

We will calculate YTM using the formula of bond price which is

Therefore,

1090 = 8.8%/2 × 1000 ×
[{1-(1+r/2)^{-2(13)}}/r/2] +
1000/(1+r/2)^{2(13)}

since we cannot solve the equation directly for R, using a spreadsheet, a financial calculator, or trialand error, we get

R = 3.85%

Since the coupon payments are semiannual, this is the semiannual interest rate. The YTM is the APR of the bond, so :

YTM = 3.85% × 2

YTM = 7.7%

For any query please comment.

1. West Corp. issued 15-year bonds two years ago at a coupon
rate of 8.2 percent. The bonds make semiannual payments. If these
bonds currently sell for 103 percent of par value, what is the YTM?
(Do not round intermediate calculations and enter your
answer as a percent rounded to 2 decimal places, e.g.,
32.16.)
YTM = %
2.
Even though most corporate bonds in the United States make coupon
payments semiannually, bonds issued elsewhere often have annual
coupon payments....

Skolits Corp. issued 20-year bonds 2 years ago at a coupon rate
of 7.4 percent. The bonds make semiannual payments. If these bonds
currently sell for 104 percent of par value, what is the YTM?
(Do not round intermediate calculations. Enter your answer
as a percent rounded to 2 decimal places, e.g.,
32.16.)
YTM
%

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