You are considering the purchase of a Coupon Bond with a Face Value of $1,000, which...
You are considering the purchase of a Coupon Bond with a Face Value of $1,000, which matures in sixteen years, and pays 3.85% (annual) coupons. If the bond is trading in the market at $955.35, what is the Yield-to-Maturity (YTM) on the investment? (The answer is a percent, round your answer to two decimal places, e.g. 4.75)
Homework Answers
Annual coupon=1000*3.85%=38.5
Approx Yield to maturity=[Annual coupon+(Face value-Present value)/time to maturity]/(Face value+Present value)/2
=[38.5+(1000-955.35)/16]/(1000+955.35)/2
which is equal to
=4.24%(Approx)
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