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31 March, 00:18

West Corp. issued 18-year bonds 2 years ago at a coupon rate of 9.5 percent. The bonds make semiannual payments. If these bonds currently sell for 105 percent of par value, what is the YTM?

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  1. 31 March, 00:41
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    The answer is 4.232%

    Explanation:

    The formula for determining the price of a bond which can also be used to find Yield-to-Maturity (YTM) is:

    PV = PMT / (1+r) ^1 + PMT / (1+r) ^2 ... PMT / (1+r) ^1 PMT + FV / (1+r) ^n

    We are to calculate Yield-to-Maturity (YTM) which is the rate of return on the bond to an investor.

    Using a Financial calculator. Input the following:

    N = (18 years - 2years) x 2 = 32

    1/Y = ?

    PV = 109

    PMT = 9.5/2 = 4.75

    FV = 100

    1/Y = 4.232%
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Home » Business » West Corp. issued 18-year bonds 2 years ago at a coupon rate of 9.5 percent. The bonds make semiannual payments. If these bonds currently sell for 105 percent of par value, what is the YTM?
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