Question

A 10​-year bond pays interest of $27.10 ​semiannually, has a face value of $1,000​, and is selling for $786.13.What are its annual coupon rate and yield to​maturity?

Answer 1

Annual coupon rate = semi annual coupon*2/oar value = 27.1*2/1000=5.42%

K = Nx2

Bond Price =∑ [(Semi Annual Coupon)/(1 + YTM/2)^k]     +   Par value/(1 + YTM/2)^Nx2

k=1

K =10x2

786.13 =∑ [(5.42*1000/200)/(1 + YTM/200)^k]     +   1000/(1 + YTM/200)^10x2

k=1

YTM% = 8.66