My question is: Do I go with 15 years or 10 years when trying to find the yield to maturity for this bond?
That bond was issued 15 years ago and now has ten years left
to
maturity. The bond must have been issued when interest rates were
higher than they are
today because it has a coupon rate of 8.00% and is trading at
109.365% of face value.
The amount outstanding is not relevant. Bond valuation arithmetic
gives one the luxury
of pretending that the amount issued was $100, that the coupons are
four dollars every six
months, the face value is $100 and its market price is $109.365.
This simplifies
calculation but one must be mindful that actual amounts are working
in millions of
dollars not hundreds of dollars so the $0.005 is very
important.
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