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Bond Yields

Hacker Software has 7.4% coupon bonds on the market with 9 years to maturity. The bonds make semiannual payments and currently sell for 96 percent of par. What is thecurrent yield on the bonds? What is the YTM? What is the effective annual yield?
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Answer #1

The given data is summarized as:

Coupon rate = 7.4%

Years to Maturity = 9 years

The Bond makes semi-annual payments.

Selling Price of the bond = 96% of Par

= $960

Calculation of YTM :

The Interest payments are done semi annually so Rate =

= 3.7%

Yield to maturity =

=

=

=

= 0.040186

Semiannual interest rate is 4.0186%

So, YTM is:

Calculation of Current Yield:

Calculation of Effective Annual Yield :

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