Question

Footsteps Co. has a bond outstanding with a coupon rate of 5.7 percent and annual payments. The bond currently sells for $927.87, matures in 13 years, and has a par value of $1,000. What is the YTM of the bond?

Answer 1

6.54%

Step-by-step explanation:

YTM which is Year to Maturity, is the yield of a bond if it is held till maturity.

`(Annual interest + Par value - Market value/Number of years)/(Par value + market value/2\\)`

Formula for YTM

Annual interest = 1000*0.57=57

Par value $1000

Market value $927.87

YTM=
`(57+ (1000-927.87)/13)/(1000+927.87/2)`

YTM= 6.54%