Footsteps Co. has a bond outstanding with a coupon rate of 5.6 percent and annual payments. The bond currently sells for $996.38, matures in 20 years, and has a par value of $1,000. What is the YTM of the bond?
Multiple Choice
5.07%
4.69%
5.63%
5.60%
5.62%
Answer:
Face Value = $1,000
Current Price = $996.38
Annual Coupon Rate = 5.60%
Annual Coupon = 5.60%*$1,000 = $56
Time to Maturity = 20 years
Let Annual YTM be i%
$996.38 = $56 * PVIFA(i%, 20) + $1,000 * PVIF(i%, 20)
Using financial calculator:
N = 20
PV = -996.38
PMT = 56
FV = 1000
I = 5.63%
Annual YTM = 5.63%
Footsteps Co. has a bond outstanding with a coupon rate of 5.6 percent and annual payments.
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