Question

bond’s market value $950 bond's maturity date 12 years from today bond’s coupon 3% (paid semi-annually)

What is the current yield on this bond?

Answer 1

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N => 12 * 2 = 24 (As coupon will be paid semiannually for 12 years, so 24 times)

PV =-950 (Current value of bond is $950)

PMT => 1.5% of  1000(Consider the face value of the bond to be 1000, so semiannual coupon will be =>Annual Rate / 2 =>3%/2 = 1.5%)

=15

FV = 1000 (Face Value of the bond is $1,000)

CPT + I/Y = 1.7571 (So this is semiannual YTM)

Annual YTM = Semiannual * 2

= 1.7571 * 2

= 3.5142

So the YTM of the bond is 3.5142%