Question

Suppose the following bond quote for IOU Corporation appears in the financial page of today’s newspaper. Assume the bond has a face value of $1,000, and the current date is April 15, 2013.

Company (Ticker)    Coupon Maturity Last Price Last Yield EST Vol (000s)   

IOU (IOU) 9.10 April 15, 2032 91.635 ??   1,837

What is the yield to maturity of the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Yield to maturity

%

What is the current yield? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Current yield

%

Answer 1

It is assumed that coupon is paid semi annually.

Given, maturity is on April 15, 2032. Hence term to maturity from April 15, 2013 is 19 years.

Price is at 91.635 which indicates the price of 91.635% of Face Value.

Yield to maturity is ascertained at 10.10% (rounded) using RATE function of Excel

Current yield= 9.93% (Rounded)

Details of calculation as follows: