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12 April, 14:29

You just purchased a bond that matures in 12 years. The bond has a face value of $1,000 and a 7% annual coupon. The bond has a current yield of 5.74%. What is the bond's yield to maturity

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  1. 12 April, 14:47
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    The coupon value is 1000 * 7% = $70

    Face Value is $1000

    Current price is annual : current yield ∵ 70:0.0574 = $1,219.54

    Maturity period: 12 years

    YTM of Bond = (70 + ((1000-1,219.54 / 12)) / ((1000+1,219.54) / 2) = 4.66 percent

    Explanation:

    The coupon value is 1000 * 7% = $70

    Face Value is $1000

    Current price is annual : current yield ∵ 70:0.0574 = $1,219.54

    Maturity period: 12 years

    YTM of Bond = (70 + ((1000-1,219.54 / 12)) / ((1000+1,219.54) / 2) = 4.66 percent
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