Question

assume a bond has 5 years to maturity, a price of 1032, a coupon rate of 6%, a par value of 1000, and 1 coupon payment per year. find the bonds yield to maturity. If the number of coupon payments per year was 4 instead of 1, what would be the bonds new yield to maturity

Answer 1

K = N

Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k]     +   Par value/(1 + YTM)^N

k=1

K =5

1032 =∑ [(6*1000/100)/(1 + YTM/100)^k]     +   1000/(1 + YTM/100)^5

k=1

YTM% = 5.26

K = Nx4

Bond Price =∑ [(Quarterly Coupon)/(1 + YTM/4)^k]     +   Par value/(1 + YTM/4)^Nx4

k=1

K =5x4

1032 =∑ [(6*1000/400)/(1 + YTM/400)^k]     +   1000/(1 + YTM/400)^5x4

k=1

YTM% = 5.27