Question

A bond has a $1,000 par value, 7 years to maturity, and a 9% annual coupon...

A bond has a $1,000 par value, 7 years to maturity, and a 9% annual coupon and sells for $1,095.

  1. What is its yield to maturity (YTM)? Round your answer to two decimal places.
  2. Assume that the yield to maturity remains constant for the next 3 years. What will the price be 3 years from today? Do not round intermediate calculations. Round your answer to the nearest cent.
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Answer #1
ans a) Computation of YTM
Put in calculator
FV 1000
PV -1095
PMT 1000*9% 90
N 7
Compute I 7.22%
YTM = 7.22%
ans b) Computation of price after 3 year
Put in calculator
FV 1000
PMT 90
I 7.22%
N 4
Compute PV ($1,059.87)
Price = $1,059.87
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