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the market price of a bond is 875.00. the bonds have a 4.25% coupon rate paid annually and mature in six years. what is the yield to maturity for the bonds if an investor buys them at the 875.00 market
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the market price of a bond is 875.00. the bonds have a 4.25% coupon rate paid annually and mature in six years. what is the yield to maturity for the bonds if an investor buys them at the 875.00 market price?

User Bennidi
by
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1 Answer

6 votes

Answer:

Yield to maturity=1098.125

Step-by-step explanation:

Yield to maturity=Return when the bond matures

Yield to maturity=market price+coupon rate

where;

Market price=875

Coupon rate=4.25% annually of market price for 6 years=(4.25/100)×875×6)=223.125

Replacing;

Yield to maturity=875+223.125=1098.125

User Alex Dn
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