Question

Suppose the following bond quotes for IOU Corporation appear in the financial page of today’s newspaper....

Suppose the following bond quotes for IOU Corporation appear in the financial page of today’s newspaper. Assume the bond has a face value of $2,000 and the current date is April 19, 2015.

Company (Ticker) Coupon Maturity Last Price Last Yield EST Vol (000s)
  IOU (IOU) 7.8 Apr 19, 2028 103.66 ?? 1,835

What is the yield to maturity of the bond (2 decimal places) and the current yeild (2 decimal places)?

Homework Answers

Answer #1

current date is April 19, 2015 and bon dmature in Apr 19, 2018, So number of year remains in maturity is 13 year.

Par Value = $2,000

Current Price = 103.66% of par

= 103.66% × $2,000

= $2,073.20

YTM of bond is calculated in excel and screen shot provided below:

YTM of bond is 7.36%.

Current Yield = Annual Coupon / Current price

= ($78 × 2) / $2,073.20

= 7.53%

Current Yield is 7.53%.

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