Question

Leechtown Co. has 4.3% coupon bonds on the market with 18 years left to maturity. The bonds make annual payments. If the bond currently sells for $870, what is its YTM? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Yield to maturity %

Answer 1

YTM = 5.45%

Explanation:

Here, we are interested in calculating the yield to maturity.

Mathematically;

Annual coupon=1000*4.3%=43

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

=[43+(1000-870)/18]/(1000+870)2

=5.45%