Question

Calculate the yield to maturity on the following bonds.

a.	A 8.7 percent coupon (paid semiannually) bond, with a $1,000 face value and 11 years remaining to maturity. The bond is selling at $920. (Do not round intermediate calculations. Round your answer to 3 decimal places. (e.g., 32.161))

Yield to maturity

% per year

b.	An 5.8 percent coupon (paid quarterly) bond, with a $1,000 face value and 10 years remaining to maturity. The bond is selling at $910. (Do not round intermediate calculations. Round your answer to 3 decimal places. (e.g., 32.161))

Yield to maturity

% per year

c.	An 7.8 percent coupon (paid annually) bond, with a $1,000 face value and 8 years remaining to maturity. The bond is selling at $1,060. (Do not round intermediate calculations. Round your answer to 3 decimal places. (e.g., 32.161))

Yield to maturity

% per year

Answer 1

1)

Coupon = (0.087 * 1000) / 2 = 43.5

Number of periods = 11 * 2 = 22

Yield to maturity = 9.911%

Keys to use in a financial calculator: 2nd I/Y 2, FV 1000, PV -920, PMT 43.5, N 22, CPT I/Y

2)

Coupon = (0.058 * 1000) / 4 = 14.5

Number of periods = 10 * 4 = 40

Yield to maturity = 7.063%

Keys to use in a financial calculator: 2nd I/Y 4, FV 1000, PV -910, PMT 14.5, N 40, CPT I/Y

3)

Coupon = (0.078 * 1000) = 78

Yield to maturity = 6.803%

Keys to use in a financial calculator: FV 1000, PV -1060, PMT 78, N 8, CPT I/Y