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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