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26 January, 03:57

What is the yield to maturity on a 3 -year, $1000 discount bond with a current price of $915 ?

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  1. 26 January, 04:20
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    The YTM of the bond is 3%

    Explanation:

    In order to find the yield to maturity we need to know the bonds present value/price, its future value/par value, years to maturity and its coupon payments. In this question we are told that the PV of the bond is $915, the FV is $1,000 the years to maturity are 3 and it is a discount bond which means there are no coupon payments. In order to calculate the YTM of the bond we will input the following values in a financial calculator.

    PV = - 915

    FV = 1,000

    PMT=0

    N=3

    Compute I=3.00
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