There is a bond that has a quoted price of 105.957 and a par value of...

There is a bond that has a quoted price of 105.957 and a par value of $2,000. The coupon rate is 6.90 percent and the bond matures in 24 years. If the bond makes semiannual coupon payments, what is the YTM of the bond?

Multiple Choice

5.77%

3.21%

3.09%

4.81%

6.41%

Expert Solution

Par/Face value	2000
Annual Coupon rate	0.069
Annual coupon	138
semi-annual coupon	69

Present Value = Future value/[(1+(r/m))^mt]
r is the interest rate
m is the compounding period that is 2
mt is the time period.
price of the bond = sum of present values of future cash flows
price of the bond	(105.957/100)*2000
price of the bond	2119.14
Use excel to find r
r/2	0.03205	r	0.0641
mt	1	2	3	4	5	6	7	8	9	10	46	47	48
future cash flow	69	69	69	69	69	69	69	69	69	69	69	69	2069
present value	66.85722591	64.781	62.76924	60.81996	58.93122	57.10112	55.32787	53.60968	51.94484	50.33171	16.16647	15.66442	455.1191
sum of present values	2119.26

The yield to maturity (YTM) of this bond is
6.41%.

jeff jeffy answered 8 months ago

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