In: Finance
What is the YTM on a 10%, 20-year simi-annual coupon bond that that currently trades for $1,013?
Bond price =C*[1-(1+YTM)^-n / YTM] + [P/(1+YTM)^n] | |||||
Where, | |||||
C= Coupon amount | |||||
YTM = Yield To maturity | |||||
n = Number of periods | |||||
P= Par value | |||||
$1013=50 * [1 - (1 + YTM)^-40 / YTM] + [1000 / (1 + YTM) ^40] | |||||
1013/50 =[1 - (1 + YTM)^-40 / YTM] + [1000 / (1 + YTM) ^40] | |||||
20.26 =[1 - (1 + YTM)^-40 / YTM] + [1000 / (1 + YTM) ^40] | |||||
YTM = | 4.93% | ||||
Annually | 9.85% |