Question

Walmart has a 8.9% coupon 15 year bond (par value = 1,000). Assume that coupon payments are semi-annual and that the current price is $1007.80. What is the yield-to-maturity of this bond? Be sure to report on an annualized basis and as a raw number - i.e. if your answer is 6.5%, input as 6.5.

Answer 1

YTM of bond is the rate at which PV of cash in Flows are equal to Bond price.

YTM = Rate at which least +ve NPV + [ NPV at that rate / change in NPV due to 0.5% Change ] * 0.5%

= 4% + [ 70.01 / 85.96 ] * 0.5%

= 4% + 0.41%

= 4.41% per Six Months

YTM per anum = 4.41% * 12 / 6

= 8.82%