Question

An 8% semiannual coupon bond matures in 5 years. The bond has a face value of $1,000 and a current yield of 8.2296%. What are the bond's price and YTM? (Hint: Refer to Footnote 6 for the definition of the current yield and to Table 7.1) Do not round intermediate calculations. Round your answer for the bond's price to the nearest cent and for YTM to two decimal places. Bond's price: $ YTM:

Answer 1

Current Yield of Bond = Annual Coupon/Current price. We will use this relation to calculate the price of bond. For YTM, in order to calculate exact YTM, we need to use Excel or financial calculator.

B C 1 2 Par Value 3 Years to maturity 4 Coupon Rate 5 Current Yield 6 Coupon per Year 7 Current price 8 Coupon payment frequency $1,000 5 years 8% 8.2296% $80 $972.10 2.00 semi-annual 10 YTM 8.70%

1000 years 2 Par Value 3 Years to maturity 4 Coupon Rate 5 Current Yield 6 Coupon per Year 7 Current price 8 Coupon payment frequency 0.08 0.082296 =B4*B2 =B6/B5 semi-annual 10 YTM =B8*RATE(B3*B8,B6/B8,-B7,B2) 12 13 14