Question

Braemar Corp. issued 30 year bonds 2 years ago at a coupon rate of 7.1%. The bond makes semi annual payments. If these bonds currently sell for 105% of par/face value, what is the yield to maturity?

Answer 1

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N = 28 * 2 = 56 (The Bond is for 30 years, as it was issued 2 years ago, so now 28 years left. The payment is semiannual, so multiplied by 2)

PV = 1050 (The present value of the bond is 105% of Face value, that is considered to be 1000. So 1050)

PMT => 7.1% of 1,000 = 71 / 2 = -35.5 ( The coupon 7.1% is on Face Value, as it is semiannual, so divided by 2)

FV = -1,000 (The Face value of bond is $1,000)

CPT + I/Y = 3.3510

The semiannual YTM is 3.3510, so the annual will be 3.3510*2 = 6.702%

The YTM of the bond is 6.702%

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