What is the yield to maturity of a five-year, $ 5,000 bond with a 4.5% coupon rate and semiannual coupons if this bond is currently trading for a price of $ 4, 814?
A. 7.5%
B. 2.68%
C. 6.43%
D. 5.36%
D. 5.36%
Working;
| Yield to maturity is the yield earned by investor when it holds investment till maturity. | |||||||||||
| Yield to maturity | = | =rate(nper,pmt,-pv,fv)*2 | |||||||||
| = | 5.36% | ||||||||||
| Where, | |||||||||||
| nper | Number of period | = | 5*2 | = | 10 | ||||||
| pmt | Coupon payment | = | 5000*4.5%*6/12 | = | $ 112.50 | ||||||
| pv | Current Price | = | $ 4,814.00 | ||||||||
| fv | Face Value | = | $ 5,000.00 | ||||||||
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