Question

A corporate bond has an annual coupon rate of 7.5% and pays interest annually. The face value is $1,000 and the current market price is $1,108.15. The bond matures in 14 years. What is the yield to maturity?

a. 6.31%
b. 7.82%
c. 8.00%
d. 8.04%
e. 8.12%

Answer 1

the correct option is a. 6.31%

Step-by-step explanation:

The computation of the yield to maturity is shown below:

Given that

Present Value = $1,108.15

NPER = 14

Future Value = $1,000

PMT = $1,000 × 7.5%

Now the formula is shown below:

= RATE(NPER;PMT;-PV;FV;TYPE)

= 6.31%

hence, the yield to maturity is 6.31%

Hence, the correct option is a. 6.31%

All other options are wrong