Question

Calculate the Yield to Maturity for a bond that has:

A face value of $100, a current price of $110, an annual coupon of 3.5%, and matures in six years.

Answer 1

Face Value = $100
Current Price = $110
Time to Maturity = 6 years

Annual Coupon Rate = 3.50%
Annual Coupon = 3.50% * $100
Annual Coupon = $3.50

Let Annual YTM be i%

$110 = $3.50 * PVIFA(i%, 6) + $100 * PVIF(i%, 6)

Using financial calculator:
N = 6
PV = -110
PMT = 3.50
FV = 100

I = 1.73%

Annual YTM = 1.73%