Question

. If I buy a bond for 1100 and it pays a 5% coupon paid semiannually and matures in 10 years, what is the YTM?

a. 5%

b. 4%

c. 3.78%

d.3.79%

Answer 1

Given,

Bond price = 1100

Coupon rate = 5%

Maturity = 10 years

Par value = 1000

Solution :-

Semi annual coupon payment (PMT) = 1000 x 5% x 6/12 = 25

Semi annual maturity (NPER) = 10 years x 2 = 20

FV = 1000

PV = -1100

So, Annual yield to maturity = 1.895% x 2 = 3.79%