Question

The bonds issued by Greenland Printing Int. has an 8 percent coupon, payable semiannually. The bonds mature in 10 years and have a $1,000 face value. Currently, the bonds sell for $932. What is the yield to maturity? a)9.05 percent b) 8.69 percent c) 8.57 percent d)8.28 percent e) 7.89 percent

Answer 1

Coupon = 8%( Semi Annual)
Time = 10 Years(t)
Coupon = Face Value * Coupon Rate/2 = 1000* 8%/2 = 40
Price = 932
Price = Coupon/(1+YTM/2)^2t + Face Value/(1+YTM/2)^2t

932 =  40/(1+YTM/2)^2t + 1000/(1+YTM/2)^2t
YTM = 9.05%
YTM can be also be calculated through Excel

		A	B	C	D	E	F	G	H	I	J	K	L	M	N	O	P	Q	R	S	T	U
1	Period	0	1	2	3	4	5	6	7	8	9	10	11	12	13	14	15	16	17	18	19	20
2		-932	40	40	40	40	40	40	40	40	40	40	40	40	40	40	40	40	40	40	40	1040
	IRR	4.524%	IRR(A2:U2)
	Rate = IRR*2	=9.05%

Option a is correct.
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