Problem 8.10 Debra King wants to invest in four-year bonds that are currently priced at $898.49. These bonds have a coupon rate of 6.0 percent and make semiannual coupon payments. What is the current market yield on this bond? (Round intermediate calculations to 5 decimal places, e.g. 1.25145 and final answer to 2 decimal places, e.g. 15.25%.)
Current market yield = _______%
Answer:
Given
Current Price P=$898.49
Face Value F=$1000
Coupon rate =6%
Semi annual coupon rate C=6%/2=3%
Number of Years =4 years
Number of Semi annuals N=4*2=8
Let r be the semi annual current market yield.
so
P=C*F*(1-(1+r)^-N)r + F/(1+r)^N
898.49=3%*1000*(1-(1+r)^-8)/r + 1000/(1+r)^8
Solving for r we get r=4.54%
Annual current market yield =2*4.54%=9.08%
Problem 8.10 Debra King wants to invest in four-year bonds that are currently priced at $898.49....
Debra King wants to invest in four-year bonds that are currently priced at $898.49. These bonds have a coupon rate of 6.0 percent and make semiannual coupon payments. What is the current market yield on this bond? (Round intermediate calculations to 5 decimal places, e.g. 1.25145 and final answer to 2 decimal places, e.g. 15.25%.) Current market yield % please show steps
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