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A bon dthat sells at par pays a semi-annual coupon of 87.3 and has 3 years...

A bon dthat sells at par pays a semi-annual coupon of 87.3 and has 3 years to maturity. What is the bond's yield to maturity? Answer percent

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Answer #1

We know that,

Price of a bond = Present value of all the semi-annual coupon and face value discounted at semi-annual YTM.

Since the bond is selling at par,

Price of the bond = Face Value of the bond and

Annual coupon rate = YTM of the bond

Face value = 1000

Annual coupon = 87.3 * 2 = 174.6

Annual Coupon Rate = (174.6 / 1000 )* 100 = 17.46%

YTM = Annual coupon rate = 17.46% Answer

Please let me know in case you have any queries and I will be happy to assist you.

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