Final answer:
The yield to maturity (YTM) can be calculated using the bond's price, semiannual interest payments, and face value. A financial calculator or spreadsheet software is required to calculate the exact YTM, which is slightly less than the coupon rate since the bond was purchased at a premium.
Step-by-step explanation:
The yield to maturity (YTM) on a bond represents the total return an investor can expect if the bond is held to maturity. In this case, John Wong purchased a bond for $1,034.66 that pays a semiannual interest of 6.5 percent. Knowing this, we will calculate the annual interest payment and then find the YTM through an equational approach that equates the present value of future cash flows (interest payments and the face value repayment) to the bond's current price.
The bond's annual coupon payment is calculated based on the bond's face value ($1,000) and the semiannual interest rate (6.5% / 2), which gives us an annual coupon payment of $65. To find the yield to maturity, we will assume that each $65 semi-annual payment is reinvested at the YTM rate.
Since the bond was purchased at a price higher than its face value ($1,034.66 vs. $1,000), the YTM will be slightly less than the coupon rate. The exact YTM can be found using a financial calculator or a spreadsheet software by inputting the current price, coupon payments, number of periods until maturity, and the bond's face value, solving for the interest rate that equates the present value of these cash flows to the current price of the bond.