Question

A 6 percent, 30-year bond with a par value of $1,000 and a current trading price...

A 6 percent, 30-year bond with a par value of $1,000 and a current trading price of $1175 has a yield to maturity of

a.

4.88 percent.
b.

5.5 percent.
c.

4.5 percent.
d.

5.25 percent.
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Homework Answers

Answer #1

Information provided:

Face value= future value= $1,000

Coupon rate= 6%

Coupon payment= 0.06*1,000= $60

Time= 30 years

Current price= present value= $1,175

The yield to maturity is calculated by entering the below in a financial calculator:

FV= 1,000

PV= -1,175

PMT= 60

N= 30

Press the CPT key and I/y to calculate the yield to maturity.

The value obtained is 4.8775.

Therefore, the yield to maturity is 4.8775%4.88%

Hence, the answer is option a.

In case of any query, kindly comment on the solution.

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