A $5000, 14.5% bond with semi-annual coupons redeemable at par on August 1, 2022, was purchased on March 5, 2011, at 95.5. What was the approximate yield rate?
The approximate yield rate was?
(Round the final answer to four decimal places as needed. Round all intermediate values to four decimal places as needed.)
YTM | = | C+(F-P/N) | |||||
F+P/2 | |||||||
here, | |||||||
C=100*0.145/2=7.25 (divided by 2 because payment is semi annual) | |||||||
Price=95.5 | |||||||
N=22.8333 (since payment is semi annual) | |||||||
137months to maturity/6months=22.8333 (4 days ignored due to approximation) | |||||||
F=redemption price | |||||||
Approx YTM = | 7.25+[(100-95.5)/22.8333] | ||||||
(for 6 months) | (100+95.5)/2 | ||||||
= | 0.0762 | ||||||
Approx YTM | |||||||
(annual) | = | 0.0762*2=0.1524 | |||||
or 15.2368% Note Please upvote the answer if you like it. |
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