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
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(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
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(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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