Nathan owns $1000 par value of Caterpillar bonds.The bond has a 5% coupon rate, pays interest semi-annually, has 10 years to maturity and is currently priced at $1,100. What is the yield to maturity for this bond?
A) 1.89% |
B) 3.78% |
C) 5.00% |
D) 6.25% |
Correct option is > B) 3.78%
Using financial calculator BA II Plus - Input details: |
# |
FV = Future Value / Face Value = |
-$1,000.00 |
PV = Present Value = |
$1,100.00 |
N = Number of years remaining x frequency = |
20 |
PMT = Payment = Coupon / frequency = |
-$25.00 |
CPT > I/Y = Rate per period or YTM per period = |
1.89 |
Convert Yield in annual and percentage form = Yield*frequency / 100 = |
3.78% |
Yield x 2/100 = 1.89 x 2/100 = 3.78%
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