Question

A four-year bond has an 8 percent coupon rate and a face value of $1,000. If the current price of the bond is $878.31, calculate the yield to maturity of the bond (assuming annual interest payments).

Answer 1

Bond yield to maturity = 12%

Step-by-step explanation:

Given the face value = $1000

Interest or coupon rate = 8%

Interet per period = 1000 x 8% =$80

Presnet value, bond price = 878.31

Maturity years = 4

Use below formula in excel to find the maturity yield.

Bond yield to maturity = RATE(NPER,PMT,PV,FV)

Thus, Bond yield to maturity = 12%