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a bond with a par value of $1000 has a 14-year maturity and an 9.5% annual...

a bond with a par value of $1000 has a 14-year maturity and an 9.5% annual coupon. The bond has a current yield of 8%. What is the bond's yield to maturity ?

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Answer #1
Coupon Payment= 1000*0.095= $95
Bond price= Coupon payment/ current yield
                     = 95/0.08= $1187.50
Bond price= $1187.50
Calculation of Yield to maturity
Interest (1000*0.095`) 95
Face value $1000
Bond price $1187.50
Years to maturity 14
Yield to maturity= Interest+ (Face value-Bond price)/years to maturity      
(face value + bond price)/2
95+(1000-1187.50)/14
(1000+1187.50)/2
Yield to maturity 7.46%
Therefore yield to maturity is 7.46%
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