Question

There is a corporate bond in the market that is selling for $3,548.60 each, stated rate of interest of 4.12% with a maturity of 100 years. What is the yield-to-maturity (YTM) of this bond?

a. 0.33%

b. 0.65%

c. 0.16%

`d. 1.30%

Answer 1

Information provided:

Current price= present value= $3,548.60

Time= 100 years

Coupon payment= $1,000*0.0412= $41.20

The yield to maturity is calculated by entering the below in a financial calculator:

FV= 1,000

PV= -3,548.60

N= 100

PMT= 41.20

Press the CPT key and I/Y to compute the yield to maturity.

The value obtained is 0.6484.

Therefore, the yield to maturity is 0.65%.

Hence, the answer is option b.

In case of any query, kindly comment on the solution.