Question

Calculate the yield to maturity on the following bonds. |

a. |
A 8.2 percent coupon (paid semiannually) bond, with a $1,000
face value and 22 years remaining to maturity. The bond is selling
at $895. |

Yield to maturity | % per year |

b. |
An 5.3 percent coupon (paid quarterly) bond, with a $1,000 face
value and 10 years remaining to maturity. The bond is selling at
$915. |

Yield to maturity | % per year |

c. |
An 7.3 percent coupon (paid annually) bond, with a $1,000 face
value and 8 years remaining to maturity. The bond is selling at
$1,065. |

Yield to maturity | % per
year |

Answer #1

**Requirement
(a)**

Yield to Maturity [YTM] = Coupon Amount + [ (Face Value – Bond Price) / Maturity Years] / [(Face Value + Bond Price)/2]

= $41 + [ ($1,000 – 895) / 44 Years)] / [($1,000 + 895) / 2]

= 4.67%

Semiannual YTM = 4.67%

Annual YTM = 9.33%

**“Yield to Maturity = 9.33** **% per year
“**

**Requirement
(b)**

Yield to Maturity [YTM] = Coupon Amount + [ (Face Value – Bond Price) / Maturity Years] / [(Face Value + Bond Price)/2]

= $13.25 + [ ($1,000 – 915) / 40 Years)] / [($1,000 + 915) / 2]

= 1.625%

Semiannual YTM = 1.625%

Annual YTM = 1.625% x 4 = 6.46%

**“Yield to Maturity = 6.46** **% per year
“**

**Requirement
(c)**

Yield to Maturity [YTM] = Coupon Amount + [ (Face Value – Bond Price) / Maturity Years] / [(Face Value + Bond Price)/2]

= $73 + [ ($1,000 – 1,065) / 8 Years)] / [($1,000 + 1,065) / 2]

= 6.24%

**“Yield to Maturity = 6.24** **% per year
“**

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