Question

Bond Yields: Skolits Corp. issued 15-year bonds two years ago at a coupon rate of 5.1 percent. The bonds make semiannual payments. If these bonds currently sell for 105 percent of par value, what is the YTM?

Answer 1

The time period of the bond is 13 years,

considering semi-annual payments,

N = 13 * 2 Years

= 26 Years

PMT = 5.1%/ 2* 1000

= $25.5

FV = $1000

PV = ($1050) (105% *1 000)

So, the I/Y = 2.29

The annual yield to maturity is 4.5852%

=4.59% ( rounded off to two decimal places)