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11 August, 08:40

the market price of a bond is 875.00. the bonds have a 4.25% coupon rate paid annually and mature in six years. what is the yield to maturity for the bonds if an investor buys them at the 875.00 market price?

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  1. 11 August, 09:06
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    Yield to maturity=1098.125

    Explanation:

    Yield to maturity=Return when the bond matures

    Yield to maturity=market price+coupon rate

    where;

    Market price=875

    Coupon rate=4.25% annually of market price for 6 years = (4.25/100) * 875*6) = 223.125

    Replacing;

    Yield to maturity=875+223.125=1098.125
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