Suppose the following bond quotes for IOU Corporation appear in the financial page of today’s newspaper. Assume the bond has semiannual payments, a face value of $2,000 and the current date is April 19, 2018. Company (Ticker) Coupon Maturity Last Price Last Yield EST Vol (000s) IOU (IOU) 5.7 Apr 19, 2034 108.96 ?? 1,827 a. What is the yield to maturity of the bond? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the current yield?
Using financial calculator BA II Plus - Input details: |
# |
FV = Future Value / Face Value = |
-$2,000.00 |
PV = Present Value = 108.96%*2000 = |
$2,179.20 |
N = Number of years remaining x frequency = 16 x 2 = |
32 |
PMT = Payment = Coupon / frequency = |
-$57.00 |
CPT > I/Y = Rate per period or YTM per period = |
2.443186 |
a. YTM annual = Periodic YTM*frequency / 100 = 2.443186 x 2 /100 |
4.89% |
b. Current Yield = |PMT|*frequency / PV = 57 x 2 /$2,179.20 = |
5.23% |
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