Question

The 7 percent semiannual coupon bonds of Over The Counter, Inc., are selling for $1,102.25. The bonds have a face value of $1,000 and mature in 18 years. What is the yield to maturity?

Multiple Choice

• 5.54 percent

• 6.06 percent

• 12.55 percent

• 6.27 percent

• 12.1 percent

Answer 1

Calculation of yield to maturity:
Interest   (7/2=3.5%)	35
Face value	1000
Bond price	1102.25
Years to maturity(18*2)	36
Yield=	Interest+ (Face value-Bond price)/years to maturity
	(face value + bond price)/2
	35+(1000-1102.25)/36
	(1000+1102.25)/2
	3.03%
Yield to maturity(annual) is 3.03*2= 6.06%
So correct answer is 6.06%