Question

Footsteps Co. has a bond outstanding with a coupon rate of 5.4 percent and annual payments. The bond currently sells for $1,007.49, matures in 18 years, and has a par value of $1,000. What is the YTM of the bond

Answer 1

Answer: 5.33%

Step-by-step explanation:

Use a financial calculator to get this faster.

On the calculator input the following.

FV = 1,000 because when it matures in 18 years it will be worth this

PV = -1007.49 as that is the current value. Should be in negative.

PMT = 54 because the coupon payments are 5.4% from the par of $1,000 which is $54.

N = 18

Click compute / CPT and then click I/Y.

You should get a YTM of 5.33%.