Yield to maturity
Heymann Company bonds have 5 years left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 10%.
A. What is the yield to maturity at a current market price of
a. $863? Round your answer to two decimal places. %
b. $1,197? Round your answer to two decimal places.%
Answer : A : 13.99%
B : 5.40%
Working notes for the above answer is as follow
Heymann Company bonds have 5 years left to maturity.
It has a $1,000 par value
coupon rate of 10%
Lets do working for calculating the
yield to maturity at a current market price of as under
a. $863? Round your answer to two decimal places. %
YTM= Annula interest + (Par value – Market Price) / Nuber of years Maturity / ( par value + Mkt price) / 2
= 100 + (1000-863) /5 / (1000+863) /2
=13.99%
b. $1,197? Round your answer to two decimal places.%
YTM= Annula interest + (Par value – Market Price) / Nuber of years Maturity / ( par value + Mkt price) / 2
= 100 + (1000-1197) /5 / (1000+1197) /2
= 5.40%
