Footsteps Co. has a bond outstanding with a coupon rate of 5.5 percent and annual payments. The bond currently sells for $1,043.27, matures in 19 years, and has a par value of $1,000. What is the YTM of the bond?
Multiple Choice
5.27%
5.14%
4.28%
5.50%
4.62%
Information provided:
Par value= future value= $1,000
Current price= present value= $1,043.27
Coupon rate= 5.50%
Coupon payment= 0.055*1,000= $55
Time= 19 years
The yield to maturity is calculated by entering the below in a financial calculator:
FV= 1,000
PV= -1,043.27
PMT= 55
N= 19
Press the CPT key and I/Y to compute the yield to maturity.
The value obtained is 5.1379.
Therefore, the yield to maturity is 5.14%
Hence, the answer is option b.
In case of any query, kindly comment on the solution.
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