Question

There is a corporate bond in the market that is selling for $1,245.43 each, stated rate of interest of 9.92% with a maturity of 3 years. What is the yield-to-maturity (YTM) of this bond? (I would like to figure out how to solve this on my ti-84 calculator if possible.)

a. 1.52%

b. 3.04%

c. 0.38%

d.0.76%

Answer 1

Answer is 1.52%

Face Value = $1,000
Current Price = $1,245.43

Annual Coupon Rate = 9.92%
Semiannual Coupon Rate = 4.96%
Semiannual Coupon = 4.96% * $1,000
Semiannual Coupon = $49.60

Time to Maturity = 3 years
Semiannual Period = 6

Let Semiannual YTM be i%

$1,245.43 = $49.60 * PVIFA(i%, 6) + $1,000 * PVIF(i%, 6)

Using financial calculator:
N = 6
PV = -1,245.43
PMT = 49.60
FV = 1000

I = 0.76%

Semiannual YTM = 0.76%

Annual YTM = 2 * 0.76%
Annual YTM = 1.52%