Question

please need some help with this question. I don't what is wrong

You received partial credit in the previous attempt. Suppose the following bond quotes for IOU Corporation appear in the financial page of today's newspaper. Assume the bond has a face value of $2,000 and the current date is April 19, 2018 points Company (Ticker) IOU (IOU) Coupon Maturity Last Price 106.34 EST Vol (000s) 1,831 Last Yield ?? Apr 19. 5 2034 Print References a. What is the yield to maturity of the bond? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the current yield? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. YTM b. Current yield 2.21 % 4.70%

Answer 1

Given IOU corporaton's bond,

Face value = $2000

coupon rate = 5%

assuming annual coupon rate,

coupon = 5% of 2000 = $100

Price = 106.34

So current price = 106.34% of 2000 = $2126.80

years to maturity = 16 years

using financial calculator, substitute following values,

FV = 2000

PMT = 1000

N = 16

PV = -2126.80

We get, I/Y = 4.44%

So, Yield = 4.44%

So current yield = coupon/current price = 100/2126.80 = 4.70%