Question

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%

Answer 1

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%