Question

There is a corporate bond in the market that is selling for $3,029.63 each, stated rate of interest of 5.50% with a maturity of 100 years. What is the yield-to-maturity (YTM) of this bond? O a. 1.53% O b. 0.38% O c. 3.06% O d. 0.77%

Answer 1

Information provided:

Present value= present value= $3029.63

Time= 100 years

Coupon rate= 5.50%

Coupon payment= 0.055*1,000= $55

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

FV= 1,000

PV= -3,029.63

N= 100

PMT= 55

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

The value obtained is 1.5274.

Therefore, the yield to maturity is 1.52745 $\rightarrow$    1.53%.

Hence, the answer is option a.

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