Question

The 7 percent annual coupon bonds of TPO, Inc. Are selling for $1,021. The bonds have a face value of $1,000 and mature in 6.5 years. What is the yield to maturity?

Answer 1

6.59%

Explanation:

The computation of the yield to maturity is shown below:

Yield to maturity is

= [Annual coupon + (Face value - Present value) ÷ time to maturity] ÷ (Face value + Present value) ÷ 2

= [$70 + ($1,000 - $1,021) ÷ 6.5] ÷ ($1,000 + $1,021) ÷ 2

= 6.59%