New Markets has $1,000 face value bonds outstanding that pay interest semiannually, mature in 14.5 years,...

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New Markets has $1,000 face value bonds outstanding that pay interest semiannually, mature in 14.5 years,...

New Markets has $1,000 face value bonds outstanding that pay interest semiannually, mature in 14.5 years, and have a 4.5 percent coupon. The current price is quoted at 97.6% of par. What is the yield to maturity?

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Answer 1

Answer #1


Face Value of Bond	$1,000
Current Price	$976	(1000*0.976)
Coupon Rate	4.50%
Semi annual interest	$22.50	(1000*0.045)/2
Number of coupon period	29	(14.5*2)
Cash flow for purchase at current price	($976)
Semiannual cash flow	$22.50
Terminal cash flow at end of 14.5 years	$1,000
Internal Rate of return	2.37%	(Using Rate function of excel with Nper=29, PV=-976, Pmt=22.5, FV=1000
Semiannual yield=internal rate of return=	2.37%
Annual yield to maturity	4.73%	(2*2.37)

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Answer 2

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