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22 November, 04:29

Dave harris has just purchased a bond with a face value of $1,000 that pays 6 percent. the purchase price of the bond was $900, and the bond will mature in 5 years. what is the yield to maturity for this bond?

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  1. 22 November, 04:38
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    The yield of maturity for this bond is "8.4 percent".

    We can calculate this in the following way;

    Yield to maturity = YTM = { ($1,000 x. 06) + [ ($1,000 - 900) / 5]}/[ ($900 + $1,000) / 2]

    = (60 + 20) / (950)

    =80/950

    =0.084

    =0.084 x 100

    = 8.4 percent
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