The market price is $1050 for a 19-year bond ($1000 par value) that pays 11 percent annual interest, but makes interest payments on a semiannual basis (5.5 percent semiannually). What is the bond's yield to maturity? The bond's yield to maturity is %. (Round to two decimal places.)
Information provided:
Par value= future value= $1,000
Market price= present value= $1,050
Time= 19 years*2= 38 semi-annual periods
Coupon rate= 11%/2= 5.50%
Coupon payment= 0.055*1,000= $55
The yield to maturity is calculated by entering the below in a financial calculator:
FV= 1,000
PV= -1,050
N= 38
PMT= 55
Press the CPT key and I/Y to compute the yield to maturity.
The value obtained is 5.1950.
Therefore, the yield to maturity is 5.1950%*2= 10.3917% 10.39%.
In case of any query, kindly comment on the solution.
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