Question

Apple issued a 10 year bond in 2015. These bonds have a coupon rate of 15%...

Apple issued a 10 year bond in 2015. These bonds have a coupon rate of 15% and make quarterly payments. Currently, these bonds have a price of $943. FV we assume is $1,000; Please explain answer using N; I/Y; PV; PMT, and FV. Thank you.

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Answer #1

You need to use Financial calculator to solve this problem. You can download it.

N => 10*4 = 40 (The Bond is making quarterly payments for 10 Years. So multiply by 4)

PV = -943 (The present value of the bond is $943)

PMT => 15% of 1,000 / 4 => 150/ 4 = 37.5 ( The coupon 15% is on Face Value, the payment is quarterly, so divide by 4)

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

CPT + I/Y = 4.0396%

The YTM is quarterly, so yearly will be 4.0396% * 4 = 16.1584%

The YTM of the bond is 16.1584%

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