Question

West Corp. issued 10-year bonds two years ago at a coupon rate of 8.1 percent. The bonds make semiannual payments. If these bonds currently sell for 102 percent of par value, what is the YTM?

Answer 1

Yield To Maturity is 7.82% per year and 3.9% per 6 months

Step-by-step explanation:

Assuming Coupon value is $100

C = Coupon Payment = 100 x 8.1%/ = $8.1

F = Face Value = $100

P = Price = $102

n = number of years = 10

Yield To Maturity = ( C + ( F - P )/n ) / ( ( F + P ) / 2 )

Yield To Maturity = ( $8.1 + ( $100 - $102 )/10 ) / ( ( $100 + 102 ) / 2 )

Yield To Maturity = $7.9 / $101

Yield To Maturity = 7.82%