Question

In: Finance

You consider purchasing a 10-year $1,000-par US Government Bond with quarterly coupon rate of 8%. When...

You consider purchasing a 10-year $1,000-par US Government Bond with quarterly coupon rate of 8%. When you check in the Wall Street Journal, the bond is listed for $1,050. What is the yield to maturity of the bond? Show all work as demonstrated in the live class, and as described in the instructions previously sent to you and posted on Canvas.

END or BGN MODE ? P/Y =

N=

I/Y=

PV=

PMT=

FV=

CPT ? ->

Expert Solution

Information provided:

Par value= future value= $1,000

Market price= present value= $1,050

Time= 10 years

Coupon rate= 8%

Coupon payment= 0.08*$1,000= $80

The financial calculator is set in the END mode as information is not given in the question that payments are made at the beginning of the period.

The yield to maturity is calculated by entering the below in a financial calculator:

FV= 1,000

PV= -1,050

N= 10

PMT= 80

Press the CPT key and I/Y to compute the yield to maturity.

The value obtained is 7.2789.

Therefore, the yield to maturity is 7.28%.

In case of any query, kindly comment on the solution.

jeff jeffy answered 2 years ago

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