Final answer:
The question seeks to determine the yield to maturity (YTM) for a 6.5% annual coupon bond with a 15-year maturity, purchased for $960, and with a par value of $1,000. YTM calculation requires discounting the bond's future cash flows to present value and solving for the interest rate that equates this present value to the purchase price.
Step-by-step explanation:
The question involves calculating the yield to maturity (YTM) of a bond. Yield to maturity represents the annualized return on a bond if it is held until the bond matures, taking into account both interest payments (coupon payments) and any gain or loss if the bond is purchased at a price different from its par (face) value.
Vickie bought a bond with a 6.5% annual coupon rate, a maturity of 15 years, and a purchase price of $960, while the par value is $1,000. To calculate the yield to maturity, you would need to solve for the discount rate that makes the present value of the bond's cash flows (annual coupon payments and the face value at maturity) equal to the purchase price ($960).
This can be mathematically intensive and typically requires a financial calculator or spreadsheet software with a built-in function for calculating YTM, since it involves solving for the interest rate in the present value of an annuity equation.