Question

​(Related to Checkpoint​ 9.2) ​(Yield to​ maturity) The market price is ​$725 for a 16​-year bond ​($1 comma 000 par​ value) that pays 9 percent annual​ interest, but makes interest payments on a semiannual basis ​(4.5 percent​ semiannually). What is the​ bond's yield to​ maturity? The​ bond's yield to maturity is nothing​%. ​ (Round to two decimal​ places.)

Answer 1

The answer is 13.2 percent

Step-by-step explanation:

Yield to Maturity is the rate of return that a bondholder (investor) is expecting on his bond from the issuer.

N(Number of years)= 32 years (16 x 2)

I/Y(Yield to Maturity) = ?

PV(Present Value) = $725

PMT(Payment) $45

FV(Future value) = $1,000

Using Financial calculator:

Yield to Maturity is:

6.58 percent semi annual.

Therefore, annual YTM will be

6.58 x 2

=13.2 percent