Question

Your financial advisor recommends buying 500 US corporate bonds currently trading at $882.18 and maturing in exactly 16 years. This is a typical US corporate bond paying a $60 coupon. What is the YTM on this bond? Enter your response as a regular percentage rate, rounded to the nearest first decimal. Do not enter dollar signs, percent signs, or commas. For example, if you calculated the decimal 0.0489, you would enter for your answer, 4.9. Or if you calculated 12.56%, you would enter 12.6.

Answer 1

Bond Par Value = $1,000

Bond Price = $882.18

Time Period = 16 years

Annual Coupon= $60

Calculating yield to maturity,

Using TVM Calculation,

I =[FV = 1,000, PV = -882.18, PMT = 60, N = 16]

I = 7.27%

So,

Yield to Maturity = 7.27%