Question

FV = $100

Price = $97.23

Coupon Rate = 8.5%

Term = 8 years

Given the information above calculate the yield to maturity (YTM). Calculate as a percentage correct to two decimal places. Do not enter the percentage (%) sign.

This question, I attempted it in a "Trial and Error" method and got the answer, which is 0.090005. Can you help me double check if this is the right way to do it?

=8.5*((1-(1+H2)^-8)/H2)+(100/(1+H2)^8)

H2= 0.09005

Answer 1

You don't have to use trial and error here.

Simply calculate it my this formula

YTM= Coupon Rate+[(Face Value - Purchase Price)/Period]

___________________________________________________

(Face Value + Purchase Price)/2

8.5+(100-97.23)/8

= ___________________

(100+97.23)/2

=0.09 upto two decimals (9%)