Question

Using semi-annual compounding, what is the yield to maturity on a 4.65 percent coupon bond with...

1. Using semi-annual compounding, what is the yield to maturity on a 4.65 percent coupon bond with 18 years left to maturity that is offered for sale at \$1,025.95? Assume par value is \$1000.

Homework Answers

Answer #1

Correct Answer =4.44%

 Bond price =C*[1-(1+YTM)^-n / YTM] + [P/(1+YTM)^n] Where, C= Coupon amount =1000*4.65%*6/12 =23.25 YTM = Yield To maturity n = Number of periods =18*2 =36 P= Par value =1000 \$1025.95=23.25 * [1 - (1 + YTM)^-36 / YTM] + [1000 / (1 + YTM) ^36] 1025.95/23.25 =[1 - (1 + YTM)^-36 / YTM] + [1000 / (1 + YTM) ^36] 44.13 =[1 - (1 + YTM)^-36 / YTM] + [1000 / (1 + YTM) ^36] YTM = 2.22% Annually 4.44%
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