What is the yield to maturity of a bond if the bond is sold at $985.48 today, pays annual coupon of 7% and matures in 12 years? Round to the nearest hundredth percent. Do not include a percent sign in your answer. (i. e. If your answer is 4.32%, then type 4.32 without a % sign)

The Yield to Maturity [YTM] of a Bond is calculated by using the following formula = Yield to Maturity [YTM] = Coupon Amount + [ (Face Value - Bond Price) / Maturity Years] / [ (Face Value + Bond Price) / 2]

Where, Coupon amount = $1000 x 7% x ½ = $35

Face Value = $1,000

Bond Price = $985.48

Maturity Years = 12 years x 2 = 24 Periods

Yield to Maturity [YTM] = Coupon Amount + [ (Face Value - Bond Price) / Maturity Years] / [ (Face Value + Bond Price) / 2]

= $35 + [ ($1,000 - $985.48) / 24 Years) ] / [ ($1,000 + $985.48) / 2]

= [ ($35 - 0.605) / 992.74] x 100 = 3.46%

The Yield-to-Maturity (YTM) of this Bond = 3.46%