Question

Abner​ Corporation's bonds mature in 23 years and pay 8 percent

interest annually. If you purchase the bonds for ​$1,050​, what is
your yield to​ maturity?

Answer 1

To calculate the yield to maturity for Abner Corporation's bonds, you need to consider the coupon rate and total cash flow, then divide the total cash flow by the purchase price of the bonds.

Step-by-step explanation:

To calculate the yield to maturity for Abner Corporation's bonds, we need to follow these steps:

1. Consider the coupon rate of 8%, which means the bonds pay 8% interest annually.
2. Calculate the total cash flow by multiplying the face value of $1,000 by the coupon rate (8%) and the number of years until maturity (23 years). This gives us $184.
3. Calculate the yield to maturity by dividing the total cash flow ($184) by the purchase price of the bonds ($1,050). The yield to maturity is approximately 17.52%.