Question

YZX Corp. has a bond issue with a $ 1,000 par value and a 15% coupon rate. It pays interest semi-annually and has 7 years remaining to maturity. It just made a coupon payment (i.e., it has 14 coupon payments left to make).If the bond’s current price is $ 1,170, what is the bond’s yield to maturity? Enter your answer as a percent without the % sign. Round your final answer to two decimals.

Answer 1

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N = 14 (14 coupons to maturity)

PV = 1,170 (The present value of the bond is $1,170)

PMT => 15% of 1,000 = 150/2 = -75 ( The coupon 15% is on Face Value, as semiannual, so divided by 2)

FV = -1,000 (The Face value of bond is $1,000)

CPT + I/Y = 5.7043

5.7043 is the semiannual rate, so the annual rate will be 5.7043*2= 11.4087

Bond's YTM is 11.4087%

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