Acme Products has a bond issue outstanding with 8 years remaining to maturity, a coupon rate...
Acme Products has a bond issue outstanding with 8 years remaining to maturity, a coupon rate of 10% with interest paid annually, and a par value of $1,000. If the current market price of the bond issue is $814.45, what is the yield to maturity, rd?
Homework Answers
Annual coupon=1000*10%=100
Approx Yield to maturity=[Annual coupon+(Face value-Present value)/time to maturity]/(Face value+Present value)/2
=[100+(1000-814.45)/8]/(1000+814.45)/2
=14%
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