Question

the petit chef co has 11.7 percent coupon bonds on the market with elven years left to maturtiy. The bonds make annuly payments and have a par value of 1000. If the bonds curtently sell for 1153.60 what is tje ytm

Answer 1

9.40%

Explanation:

Given:

Annual coupon rate = 11%

Time left to maturity = 11 years

Par value of bond = 1000

Present value of bond = 1153.60

Required: Find Yeild to Maturity (YTM)

To find the yield to maturity, use the formula below:

YTM = [Annual coupon+(Face value-Present value)/time to maturity]/(Face value+Present value)/2

where annual coupon = 1000 * 11% = 110

Thus,

`YTM = ((110+(1000-1139.59)/(9))/(((1000+1139.59))/(2))`

YTM = 9.40%

Therefore the approximate YTM is 9.40%