The market price of a bond is $1,236.94, it has 14 years to maturity, a $1,000 face value, and pays an annual coupon of $100 in semiannual installments. What is the yield to maturity?

Question

1.77K viewsJanuary 20, 2017

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Darshita 6.14K January 20, 2017 0 Comments

A) 18%
B) 26%
C) 37%
D) 11%

E) 7.27%

1 Answer

score 0 · Answer 1 · 2017-01-20T02:07:01+00:00

Answer: E

Response:

$1,236.94 = $50 {[1 – 1/(1 + R)28] / R} + 1,000 / (1 + R)28; R = 3.637%; YTM = 3.64% x 2 = 7.27%

The algebra is a bit annoying, so do the TVOM stuff, thusly: -1,236.94PV, 1000 FV, 28 N, 50 PMT, CPT I/Y = 3.637. I/Y x 2 = 3.637 x 2 = 7.274 or 7.27%

1 Answer

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