Question

Let's focus on CAT.MK

How do you go about finding the YTM of a bond if given the value (in thousands), maturity date, and coupon rate?

		BOND: CAT.MK
		Value	Maturity	Coupon	YTM
2019		250,000.00	2021	9.38%
2020		250,000.00	2021	9.38%
2021		250,000.00	2021	9.38%
		(Values in Thousands of Dollars)

CAT.MK

--Original Maturity: $250,000 (dollars in thousands)

--Amount Outstanding: $120,477 (dollars in thousands)

--Payment Frequency: Semi Annual

--Offered Date: 03/14/1991

Thank you!

Answer 1

The Par value of the bond is 2,50,000 as mentioned in the question

The original maturity value is also 2,50,000 as specified above so bond is not selling at discount or premium .So Maturity value of the bond is equal to market value of the bond.

Yield is term used to mention that discount rate where par value of bond is equal to maturity value of the bond.

So in above mentioned values

Par Value=maturity value

2,50,000=2,50,000

So the coupon rate becomes the Yield to maturity of the bond when it is held till maturity.

The coupon rate is 9.38%

So the YTM is 9.38%