What is the yield to maturity on a $1,000 par value 4% bond purchased for $850? Assume the coupon is paid annually and the maturity is in 13 years.
Annual coupon=$1000*4%=$40
Hence approx yield to maturity=[Annual coupon+(Face value-Present value)time to maturity]/(Face value+Present value)/2
=[40+(1000-850)/13]/(1000+850)/2
=5.66%(Approx).
What is the yield to maturity on a $1,000 par value 4% bond purchased for $850?...
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