Final answer:
The yield-to-maturity of a bond is a complex calculation reflecting the discounted present value of all future coupon payments and the par value repayment, in light of the current market price, coupon rate, time to maturity, and coupon payment frequency.
Step-by-step explanation:
The yield-to-maturity (YTM) of a bond is a comprehensive measure of a bond's return that takes into account its current market price, par value, coupon interest rate, and the time to its maturity. Calculating the YTM for a bond with a price of $1,209, a 5.94% coupon rate, $1,000 par value, with interest paid semi-annually and 22 years to maturity involves a complex process that requires solving for the interest rate that equates the present value of all future coupon payments and the repayment of the par value at maturity to the bond's current market price.
The YTM reflects interest payments (semi-annually in this case), capital gains or losses (if the bond is sold at a price different from its par value), and the overall return the investor can expect if the bond is held to maturity. It is affected by the frequency of coupon payments and changes in market interest rates; for example, when interest rates rise, existing bonds with lower coupon rates become less attractive and may sell for less than their face value.