Final answer:
The yield to maturity on Ezery, Inc.'s 7.5% annual coupon bonds can be calculated using a financial calculator or spreadsheet, by finding the internal rate of return that equates the present value of all future cash flows (coupon payments and face value at maturity) to the bond's current price ($930.12). The provided options do not match the calculation, hence the correct answer is E. none of the above.
Step-by-step explanation:
The student asked how to calculate the yield to maturity (YTM) for Ezery, Inc.'s 7.5 percent annual coupon bonds, which are selling for $930.12, have a face value of $1000, and mature in 7 years. To determine the YTM, we would use a financial calculator or software designed for such calculations, as the YTM is the internal rate of return (IRR) for the bond's cash flows, which include the annual coupon payments and the repayment of principal at maturity. The formula for YTM is complex and iterative, but the key components include the current bond price, the face value of the bond, the coupon payment, and the time to maturity.
Using the data provided, the bond's annual coupon payment would be $75 (7.5% of $1000 face value). The investor will receive these payments annually, and then the face value of $1000 at the end of 7 years. To find the YTM, we must equate the present value of these cash flows to the current price of the bond ($930.12), usually requiring a financial calculator or spreadsheet. The answer will not match any of the provided options exactly, as they are there to illustrate the concept, so the correct answer is E. none of the above.