Question

You just purchased a bond that matures in 12 years. The bond has a face value of $1,000 and a 7% annual coupon. The bond has a current yield of 5.74%. What is the bond's yield to maturity

Answer 1

The coupon value is 1000 × 7% = $70

Face Value is $1000

Current price is annual ÷ current yield ∵ 70÷0.0574= $1,219.54

Maturity period: 12 years

YTM of Bond = (70+((1000-1,219.54 / 12)) / ((1000+1,219.54)/ 2) = 4.66 percent

Step-by-step explanation:

The coupon value is 1000 × 7% = $70

Face Value is $1000

Current price is annual ÷ current yield ∵ 70÷0.0574= $1,219.54

Maturity period: 12 years

YTM of Bond = (70+((1000-1,219.54 / 12)) / ((1000+1,219.54)/ 2) = 4.66 percent