Ask Question
20 June, 00:22

American Hat has $1,000 face value bonds outstanding with a market price of $1,150. The bonds pay interest semiannually, mature in 8 years, and have a yield to maturity of 5.98 percent. What is the current yield?

+2
Answers (1)
  1. 20 June, 00:33
    0
    7.28%

    Explanation:

    Using Time Value for Money TVM we calculate payment for the period:

    PMT = {FV - PV * (1 + r) ^n] / {[ (1 + r) ^ n] - 1 } / r

    PV = - 1150

    FV = 1000

    N = 8 * 2 = 16

    I = 5.98/2 = 2.99%

    842.54 / 20.14

    PMT = 41.83

    To calculate current yield:

    PMT * 2 / PV

    41.83 * 2 / 1150

    = 7.28 %
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “American Hat has $1,000 face value bonds outstanding with a market price of $1,150. The bonds pay interest semiannually, mature in 8 years, ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers