Question

yeild to maturity on a 10 year, 9% annual coupon, 1000 par value bond selling for 887. find yield to maturity if price were 1134.20

Answer 1

Given about a bond,

Years to maturity = 10 year

coupon rate = 9%

Face value = $1000

So, annual coupon = 9% of 1000 = $90

current price = $887

So, Yield to maturity of the bond can be calculated on financial calculator using following values:

FV = 1000

PMT = 90

N = 10

PV = -887

Compute for I/Y, we get I/Y = 10.91

So, Yield to maturity = 10.91%

If price were $1134.20

Change PV to -1134.20

Yield to maturity of the bond can be calculated on financial calculator using following values:

FV = 1000

PMT = 90

N = 10

PV = -1134.20

Compute for I/Y, we get I/Y = 7.08

So, new Yield to maturity = 7.08%