You own a bond that pays $64 in interest annually. The face value is $1,000 and the current market price is $1,062.50. The bond matures in 11 years. What is the yield to maturity

5.7%

Explanation:

We can find the answer using the Yield to Maturity Formula. The figure we will obtain is approximate, but it works as well:

YTM = [C + (F-P) / n] / [ (F+P) / 2

Where:

C = Coupon F = Face value P = Market Price n = years to maturity

Now, we simply plug the amounts into the formula:

YTM = [64 + (1,000-1,062.50) / 11] / [ (1,000+1,062.50) / 2

= 0.057

Thus, the yield to maturity of this bond is 5.7%