Question

If the following quotes are from March 15, 2013, what was the yield to maturity for the PO.BN bonds with $1,000 face values and semiannual payments?

Company (Ticker)	Coupon	Maturity	Last Price	Last Yield	EST $ Vol (000’s)
Paul Orts (PO.BN)	10.20	Mar 15, 2020	92.368	??	2,860

(Do not include the percent sign (%).Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Answer 1

Yield to Maturity [YTM] of the Bond

Yield to Maturity [YTM] = Coupon Amount + [(Par Value – Bond Price) / Maturity Years] / [(Par Value + Bond Price)/2]

Par Value = $1,000

Semi-annual Coupon Amount = $51 [$1,000 x 10.20% x ½]

Bond Price = $923.68 [$1,000 x 92.368%]

Maturity Years = 14 Years [(2020 – 2013) x2]

Therefore, Yield to Maturity [YTM] = Coupon Amount + [(Par Value – Bond Price) / Maturity Years] / [(Par Value + Bond Price)/2]

= [$51 + {($1,000 – $923.68) / 14 Years)] / [($1,000 + $923.68) / 2]

= [($51 + $5.45) / $961.84]

= [$56.45 / $961.84]

= 0.05915

= 5.915%

The Semi-annual YTM = 5.915%

Therefore, the Annual YTM = 11.83% [5.915% x 2]

“Hence, the Yield to Maturity (YTM) of the Paul Orts (PO.BN) = 11.83%”