Question

What is the annual yield to maturity for a 30 year bond, 12 years left to maturity, currently selling at $950.00 and an coupon rate of 10%? Assume semi-annual compounding.

Answer 1

The annual yield to maturity is computed as shown below:

Plug the below variables in the financial calculator as follows:

PV = - 950

FV = 1,000

PMT = 50 (10% / 2 x 1,000)

N = 24 (12 x 2)

Finally press CPT and then press I/Y. It will give I/Y equal to 5.37571114%.

To get it on annual basis, we shall multiply it by 2 as follows:

= 5.37571114% x 2

= 10.75% Approximately

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