Question

The market price is $725 for a 12 -year bond ($1,000 par value) that pays 12 percent annual interest, but makes interest payments on a semiannual basis (6 percent semiannually). What is the bond's yield to maturity?

The bond's yield to maturity is?.

(Round to two decimal places.)

Answer #1

- Face Value of Bond = $1000

Semi-annual Coupon payment = $1000*12%*1/2 = $60

No of coupon Payments = 12 years*2 = 24

Current price = $725

Calculating the Semi-annual YTM using Excel "rate" function:-

Semi-annual YTM = 8.7850%

Annual YTM = 8.7850%*2 = 17.57%

So, **the yield to maturity is
17.57%**

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