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What is the YTM on a 10%, 20-year simi-annual coupon bond that that currently trades for...

What is the YTM on a 10%, 20-year simi-annual coupon bond that that currently trades for $1,013?

Solutions

Expert Solution

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%

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