Question

A 30-year maturity bond with face value of $1,000 makes semiannual coupon payments and has a coupon rate of 9.2%. (Do not round intermediate calculations. Enter your answers as a percent rounded to 3 decimal places.)

a.	What is the yield to maturity if the bond is selling for $960?

Yield to maturity

%

b.	What is the yield to maturity if the bond is selling for $1,000?

Yield to maturity

%

c.	What is the yield to maturity if the bond is selling for $1,080?

Yield to maturity

%

Answer 1

Bond Par Value = $1,000

Time to maturity = 30 years

Coupon Rate = 9.2% semi-annually

a.

Bond Price = $960

Calculating YTM of Bond,

Using TVM Calculation,

I = [FV = 1000, PV = 960, T = 60, PMT = 46]

YTM = 9.52%

b.

Bond Price = $1000

Calculating YTM of Bond,

Using TVM Calculation,

I = [FV = 1000, PV = 1000, T = 60, PMT = 46]

YTM = 9.2%

c.

Bond Price = $1080

Calculating YTM of Bond,

Using TVM Calculation,

I = [FV = 1000, PV = 1080, T = 60, PMT = 46]

YTM = 8.59%