Question

Stoessel, incorporated, issued 20-year bonds 3 years ago at a coupon rate of 8.5 percent. the bonds make semiannual payments. if these bonds currently sell for 91.4 percent of par value, what is the ytm?

O 8.98%
O 9.53%
O 9.13%
O 9.27%
O 8.42%

Answer 1

Calculating the yield to maturity (YTM) for Stoessel, Incorporated's 8.5 percent coupon bonds requires the bond's face value, current market price, coupon payments, years to maturity, and number of payment periods. The YTM represents interest payments and any gains or losses if the bond is held to maturity.

Step-by-step explanation:

The student is asking about the calculation of the yield to maturity (YTM) for Stoessel, Incorporated's bonds that were issued 3 years ago and currently sell for 91.4 percent of par value. The coupon rate is 8.5 percent, and the bonds make semiannual payments.

To calculate YTM, one needs to know the face value of the bond, the price it currently sells for, the coupon rate, the number of years remaining until maturity, and the number of payment periods per year. This information, when plugged into a financial calculator or used in a present value of annuity and face value calculation, will yield the YTM.

The correct YTM value is not provided here, but it can be calculated using the aforementioned data and will reflect the interest payments and potential capital gains or losses from holding the bond.